Tax Advisory on Property Sale in India | Savlana Init

Capital Gains · Property Transactions

Tax Advisory on Property Sale — Before the Deed Is Signed.

Property sales go wrong on withholding, stamp duty value and missed reinvestment windows. All three are fixable beforehand and expensive afterwards.

A property sale generates three distinct tax problems at once, and they operate on different timelines. The first is the capital gain itself, which depends on the cost base, the holding period and the regime in force on the date of transfer. The second is the full value of consideration, which Section 50C substitutes with the stamp duty value where that is higher, subject to a ten per cent tolerance — so the tax can exceed what the numbers in the agreement suggest. The third is deduction at source, which is entirely front-loaded and which decides how much money the seller actually receives at closing.

The withholding position depends on who is selling. Where the seller is resident and the consideration or stamp duty value is fifty lakh rupees or more, the buyer deducts one per cent under Section 194-IA and files Form 26QB, needing no TAN. Where the seller is a non-resident, Section 195 applies instead: deduction runs at the rate applicable to the gain plus surcharge and cess, computed on the entire sale consideration rather than the gain, the buyer must obtain a TAN and file Form 27Q, and the sum withheld frequently exceeds the actual liability by a very large multiple. The remedy is a lower or nil deduction certificate under Section 197, applied for before the transaction closes.

The planning opportunities close quickly. Reinvestment relief under Sections 54, 54F and 54EC runs from the date of transfer, and Section 54EC in particular allows only six months. Where the reinvestment will not complete before the return filing due date, a Capital Gains Account Scheme deposit must be made before that date or the exemption is lost. Advance tax on the gain falls due in the instalment following the transfer. For non-residents there is a further layer — Form 15CA and Form 15CB certification and the repatriation limits under the exchange control rules. Almost all of this is easier to arrange before signature than after, which is why property tax advice belongs at the drafting stage.

Our Property Sale Services

Pre-Sale Tax Projection

Computation of the expected gain, tax and net proceeds before the deal is agreed, including the effect of stamp duty value substitution.

Section 197 Certificate for NRI Sellers

Application and follow-up for a lower or nil deduction certificate, so withholding is based on the real gain rather than the gross consideration.

Buyer-Side TDS Compliance

Form 26QB or Form 27Q compliance, TAN application where required, certificate issue and correction of defaults.

Stamp Duty Value Review

Comparison of agreement value with stamp duty value, application of the tolerance band, and valuation officer references where the stamp value is excessive.

Exemption Structuring

Planning of relief under Sections 54, 54F and 54EC around the sale timeline, with Capital Gains Account Scheme deposits where needed.

Joint Ownership and Co-Owner Split

Allocation of consideration, cost and exemption among co-owners according to their actual contribution and share, which is often mis-stated.

Repatriation for Non-Residents

Form 15CA and Form 15CB certification and remittance of sale proceeds abroad within the applicable limits.

Return Filing and Refund

Capital gains reporting in the return, recovery of excess withholding as refund, and response to any assessment query on the transaction.

Our Process

Transaction and Cost Review

We review the title documents, purchase records, improvement costs and the proposed agreement, and project the gain and the net proceeds.

Withholding Strategy

The applicable deduction provision is fixed, and for non-resident sellers a Section 197 application is filed well ahead of closing.

Exemption Timeline

Reinvestment options are mapped against the date of transfer, with the six-month and filing-date deadlines calendared from the outset.

Closing Support

We support the closing — withholding certificates, buyer filings, co-owner allocation and, for non-residents, remittance certification.

Filing and Recovery

The return is filed with the gain and exemption claims, and any excess withholding is pursued to refund.

Why It Matters

✓Net proceeds known before the agreement is signed, not after

✓Section 197 certificate obtained so funds are not blocked at closing

✓Stamp duty value substitution anticipated in the projection

✓Buyer’s TDS obligations completed correctly, protecting both sides

✓Reinvestment windows calendared from the date of transfer

✓Scheme account deposit made in time, preserving the exemption

✓Co-owner shares allocated on contribution rather than convenience

✓Excess withholding recovered rather than written off

Frequently Asked Questions

Under Section 195, deduction is at the rate applicable to the nature of the gain plus surcharge and cess, computed on the entire sale consideration rather than on the gain. The practical result is that a very large proportion of the sale price is withheld even where the actual gain is modest. A lower or nil deduction certificate under Section 197, obtained before closing, is the only way to limit deduction to the real liability.

Where the seller is resident and the consideration or stamp duty value is fifty lakh rupees or more, the buyer deducts one per cent under Section 194-IA, pays it through Form 26QB and issues Form 16B. No TAN is needed. Where the seller is a non-resident, the buyer must obtain a TAN, deduct under Section 195, file quarterly returns in Form 27Q and issue Form 16A. Getting this wrong makes the buyer an assessee in default.

Section 50C substitutes the stamp duty value as the full value of consideration where it exceeds the declared consideration, subject to a tolerance of ten per cent. Where the seller contends that the stamp duty value exceeds fair market value, the assessing officer may refer the valuation to a valuation officer, and the assessment then proceeds on the valuation officer’s figure if lower. The reference is frequently worth pursuing.

Long-term gain can be sheltered under Section 54 by buying or building another residential house, under Section 54F where the asset sold was not a residential house, or under Section 54EC by investing in specified bonds within six months, subject to a fifty lakh ceiling. Sections 54 and 54F are capped at ten crore rupees of qualifying investment. Each has strict windows, so the plan should be settled before the sale completes.

In the proportion in which they actually contributed to the purchase and hold the property, not necessarily in the proportion recited in the deed. Each co-owner computes and reports his own share of the gain and claims his own exemption. Where one owner funded the entire purchase, clubbing provisions may attribute the whole gain back to that person, which is a point better resolved at purchase than at sale.

Yes. Where the property was acquired in accordance with the exchange control rules and paid for from foreign currency or NRE or FCNR funds, sale proceeds of up to two residential properties may be repatriated. Otherwise the proceeds fall within the annual remittance limit of one million United States dollars. The tax position must be settled first, and Form 15CA and Form 15CB certification is required before the bank will release funds.

Selling property in India this year?

Send us the title papers and the draft agreement. We will project the tax and net proceeds, apply for the Section 197 certificate if needed, and plan the exemption before closing.