Transfer of Property

[KUMAR Narasimhan]

Dear Sir / Mam,

An NRI transfer his funds ₹ 2 crore to NRO account and participated in Auction to buy a property, and transferred the amount to bank. Now the original owner of that property is requesting NRI to give back the property to him and he is ready to pay NRI ₹ 25 Lakhs for this.

Now bank will refund the 2 Crore to NRI to his saving account. In this process NRI received as Income ₹ 25 Lakhs without doing the property registration.

How to treat these transaction in Income tax Withrespect to NRI and Actual Owner of the property? Should Actual owner to deduct TDS @ 20.88% for the NRI transaction?

[Padmanathan KV]

In my humble opinion, the income will be taxable as "income from other source" in the hands of the NRI. The Actual Owner has to deduct TDS @ 20.8% on 25 lakhs u/s 195.

AI Summary

Income from Other Sources: payment received for relinquished property is taxable and payer must deduct TDS under withholding provisions. Payment received by the NRI for relinquishing the property-while the bank refunds the principal to the NRI's savings account and no registration occurs-constitutes taxable income from other sources in the NRI's hands; the payer must withhold tax at the applicable TDS rate under the withholding provisions on payments to a non-resident.