When a Non-Resident Indian (NRI) sells property in India, the buyer may have an obligation to deduct tax at source under Section 195 where the payment is chargeable to tax in India. A purpose-specific Government Approved Property Valuation can provide important valuation evidence for the transaction, capital-gain computation and related tax proceedings.
Property valuation evidence in relation to Stamp Duty Value / SDV.
Historical 1 April 2001 FMV for eligible pre-2001 property.
Supporting valuation evidence where a lower or nil TDS certificate is being sought.
The tax treatment of an NRI property sale depends on the nature of the payment, the applicable provisions, the capital-gain computation and, where relevant, treaty provisions.
When a buyer makes a payment to a non-resident, Section 195 applies where the payment is chargeable to tax in India. The deduction is made at the rates in force, subject to the applicable tax provisions and any available treaty provisions.
For an NRI property transaction, the underlying capital gain calculation can therefore become an important part of determining the tax position and the amount relevant for TDS purposes.
Section 195 does not operate as a simple flat-rate rule for every NRI property sale. The applicable deduction depends on the chargeability of the payment, rates in force, the nature of the gain and applicable treaty provisions.
In an NRI property transaction, valuation evidence may be relevant to several different statutory and commercial questions. The certificate must therefore be prepared for the specific purpose for which it is required.
A property valuation can provide independent evidence of Fair Market Value when the sale consideration and Stamp Duty Value require examination under the applicable Section 50C framework.
Explore Section 50C Framework →For eligible property acquired before 1 April 2001, a valuation can establish the relevant historical Fair Market Value for consideration as the cost of acquisition under the applicable tax provisions.
Explore Capital Gain Valuation →For an NRI selling property in India, the transaction may also involve banking, tax and foreign-exchange documentation. Valuation evidence can form part of the supporting documentation considered alongside the applicable FEMA and tax requirements.
NRI Valuation Framework →Section 197 provides a mechanism through which an assessee can apply to the Assessing Officer for a certificate authorising deduction at a lower rate or nil deduction, where the circumstances and estimated income justify it.
In an NRI property transaction, valuation evidence may contribute to the underlying capital-gain computation, including the determination of an applicable Section 55(2)(b) historical FMV where relevant.
Establish relevant FMV and valuation evidence.
Determine the applicable cost and gain inputs.
Supporting evidence is considered by the Assessing Officer.
For detailed guidance on property capital gains, Section 50C, Section 55(2)(b), Finance Act 2024 and related valuation requirements, visit the dedicated Government Approved Capital Gain Valuers practice.
Discuss your property, valuation date, sale transaction, Section 195 TDS requirement or historical FMV requirement with the valuation practice.