Day: November 10, 2025

TDS on NRI Property Purchase: How Form 26A Can Protect Buyers from Section 201 Defaults

When purchasing property from a Non-Resident Indian (NRI), tax compliance around Tax Deducted at Source (TDS) becomes a critical issue for buyers. Failure to correctly deduct and deposit TDS under Section 195 of the Income Tax Act can result in the buyer being held liable for tax defaults under Section 201(1). However, a recent ruling by the Income Tax Appellate Tribunal (ITAT), Mumbai has provided significant relief to buyers, emphasizing the protective role of Form 26A. This blog explores the complexities around TDS on NRI property purchases, the importance of Form 26A, and practical steps buyers can take to avoid penalties.

Understanding TDS on Property Purchases from NRIs

TDS obligations differ substantially when purchasing property from an NRI compared to resident sellers. Under Section 195 of the Income Tax Act, the buyer (known as the deductor) must withhold tax on the amount paid to the NRI seller (the deductee) before transferring the sale proceeds.

• The prescribed TDS rate on purchase from NRIs typically includes 20% long-term capital gains tax plus applicable surcharge and cess, or 30% for short-term capital gains.
• Buyers are required to obtain and use a TAN (Tax Deduction Account Number) for deducting and depositing TDS.
• They must file TDS returns quarterly and issue TDS certificates to sellers as proof of deduction.
• Failure to deduct or deposit TDS can lead to personal liability of the buyer for the unpaid tax under Section 201 of the Income Tax Act.

This regulatory framework aims to ensure taxes due on capital gains by NRIs are collected at source, but it can create practical challenges and risks for buyers, especially if compliance details are missed or delayed.

The Crucial Role of Form 26A in Shielding Buyers

Form 26A serves as a certification from the deductee (NRI seller) confirming that the specified tax on the transaction has been duly paid. Recent legal developments have emphasized the importance of this document in protecting buyers from tax default responsibilities.

The ITAT Mumbai ruling clarified:

• Relief under the first proviso of Section 201(1) is available to buyers if they can furnish Form 26A certifying payment of the tax by the deductee.
• Even if the buyer initially faces a demand notice for default in TDS payment, providing Form 26A verifies that the seller has ultimately paid the tax, thus shielding the buyer.
• In a particular case, although the certificate was received post-appeal, the matter was remanded for verification, indicating the tribunal’s willingness to protect buyers upon due proof.

This ruling is important because it shifts some burden away from buyers, who otherwise risk being penalized for non-payment despite deducting tax in good faith, or when deductee has settled the tax liability independently.

Practical Compliance Tips for Buyers Purchasing Property from NRIs

To ensure smooth transactions and avoid being penalized under Section 201, buyers should adopt rigorous documentation and procedural controls:

• Deduct and Deposit TDS Promptly: Deduct TDS at the prescribed rate from the sale consideration and deposit it timely using the TAN.
• File Quarterly TDS Returns: Submit Form 27Q for non-resident TDS returns quarterly and adhere to deadlines for TDS certificate issuance (Form 16A).
• Obtain Form 26A from the Seller: The buyer should request the deductee to furnish Form 26A, certifying tax payment, which can be presented if tax default notices arise.
• Maintain Records to Show Compliance: Keep copies of payment challans, TDS certificates, and correspondence with sellers regarding tax payment status.
• Seek Professional Assistance: Engage tax experts to handle complex cross-border compliance, including applying for lower TDS certificates for sellers and reconciling Form 26AS tax credits.

Through meticulous adherence to compliance norms and documentation, buyers can protect themselves against adverse consequences, safeguard transactions, and avoid penalty exposure under Section 201.

Conclusion

The ITAT Mumbai ruling reinforces that presentation of Form 26A certifying the deductee’s tax payment provides crucial relief to buyers from tax default liability under Section 201 of the Income Tax Act. For buyers purchasing property from NRIs, this means diligent TDS deduction along with obtaining proper tax payment certification from sellers is essential.

In the increasingly scrutinized arena of NRI property transactions, enhanced understanding of TDS provisions and relevant documentation safeguards is key for smooth and compliant dealings.

Understanding the Key Changes in GSTR-9 Table 8A & 8B for FY 2024–25

The Central Board of Indirect Taxes and Customs (CBIC) has brought significant revisions to the annual GST return filing process for the financial year 2024–25, specifically targeting Tables 8A and 8B of GSTR-9. These changes aim to improve the accuracy of Input Tax Credit (ITC) reporting and reduce disputes caused by data mismatches in GST returns.

The Revised Framework for Table 8A

Table 8A of GSTR-9 is crucial as it auto-populates ITC data corresponding to inward supplies for a financial year. The recent Notification No. 13/2025 clarifies that for FY 2024–25, Table 8A will pull data strictly from the GSTR-2B returns related to that financial year. Notably:

• It will include all eligible invoices reflected in GSTR-2B from April 2024 to March 2025, as well as those appearing in the April to October 2025 period of GSTR-2B for FY 2024–25.
• Invoices pertaining to previous years, specifically FY 2023–24 appearing in GSTR-2B from April to October 2024, will be excluded to eliminate carry-forward mismatches.
• This approach is designed to reduce discrepancies and prevent over-claims or under-claims of ITC that typically arise from overlapping reporting periods.

This revamped data sourcing helps in aligning the ITC reported in the annual return with the actual claims filed monthly, streamlining compliance and reducing the risk of litigation for taxpayers[1][3][7].

Automatic Population and Role of Table 8B

Table 8B, which reflects the ITC reconciled with GSTR-9, will now get auto-populated from Table 6B of the GSTR-9 return for FY 2024–25 onward. Important highlights include:

• Table 8B will no longer include ITC reclaimed under Rule 37/37A and focuses solely on consistent ITC claims aligned with notified GST provisions.
• It is delinked from Table 8A, providing a clearer distinction between gross ITC available and ITC eligible after necessary reversals or adjustments.
• The auto population helps minimize manual errors and supports robust reconciliation, enhancing the credibility of GST annual filings.

By separating these tables’ functions and automating respective data flows, CBIC intends to provide taxpayers with a more transparent and error-resistant framework for ITC reporting[9][7].

Impact on Taxpayers and Compliance Recommendations

These regulatory changes require taxpayers and GST professionals to adapt their compliance processes carefully. Key compliance considerations include:

• Regular Reconciliation: Taxpayers should reconcile monthly GSTR-2B data meticulously to ensure all inward supplies and ITC figures align with the auto-populated data in Table 8A and Table 8B.
• Awareness of Reporting Windows: Understanding which invoices are included or excluded based on invoice dates and GSTR-2B appearances is critical to avoid mismatches and disputes during annual return submission.
• Utilization of Portal Tools: Leveraging the GST portal’s utilities for downloading and validating JSON data before final submission can prevent locked errors post-filing.
• Careful Handling of Rule 37/37A ITC: ITC reclaimed due to temporary reversals (Rule 37/37A) must be tracked separately and disclosed appropriately in other tables (such as Table 6H), not in Table 8B.
• Deadline Compliance: Filing the annual return well before the December 31, 2025 deadline is crucial to avoid last-minute portal glitches and penalties.

These steps will help businesses reduce GST disputes, maintain data integrity, and enhance ease of doing business under the GST regime[1][4][7][9].

Conclusion

The CBIC’s Notification 13/2025 and related FAQs have brought clarity and automation into the annual ITC reporting regime through significant updates in GSTR-9 Tables 8A and 8B for FY 2024–25. Taxpayers must align their accounting and GST return processes with these changes to ensure smooth compliance, avoid mismatches, and minimize litigation risks. Proactive reconciliation, understanding new data flows, and accurate reporting will be key to navigating the updated GST annual return framework.