Can DTAA Reduce TDS on Property Sales?

I had a similar question and initially thought DTAA would automatically give me a lower rate.

The better way to look at it is:

DTAA determines taxing rights and treaty treatment; it does not automatically override every Indian TDS calculation.

For an Indian property sale by an NRI, India generally has the right to tax the capital gain because the asset is situated in India.

A TRC can be important when claiming treaty benefits, but having one does not by itself establish that India cannot tax the gain.

I would also keep the purchase deed, sale agreement, improvement expenses, acquisition-cost records and TDS documentation ready. These can become important when calculating the actual capital gain and filing the return.

If excess TDS has been deducted, the final tax liability is determined through the income-tax return, and an eligible refund can be claimed for excess tax.

One thing I would check carefully is whether the buyer is calculating TDS on the capital gain or the entire consideration.

For an NRI seller, Section 195 applies rather than the resident-property TDS provision under Section 194-IA. The Income Tax Department currently states that for a non-resident selling immovable property, the buyer has to deduct tax under Section 195.

The current Income Tax Department guidance lists 12.5% for long-term capital gains on transfers on or after July 23, 2024, and 30% for short-term capital gains for an individual/firm, before applicable surcharge and cess.

However, the actual withholding calculation can be more complicated than simply applying a percentage to the sale price.

If the expected TDS is substantially higher than the eventual tax liability, I would look into obtaining an appropriate lower/nil deduction determination rather than assuming DTAA alone will solve it.

I looked into this when selling an apartment in India while living abroad.

The important point is that DTAA does not necessarily take the capital gain outside Indian taxation.

For immovable property, the treaty generally gives taxing rights to the country where the property is situated. Since the property is in India, India normally retains the right to tax the capital gain.

The Income Tax Department's current guidance specifically says that when a non-resident sells immovable property in India, the buyer is required to deduct TDS under Section 195. It also says the final TDS rate should be determined after considering the applicable DTAA, but in most DTAAs India has the right to tax gains from property situated in India.

So having a UAE, UK, US or Singapore TRC doesn't automatically mean the property-sale TDS becomes zero or gets reduced.

The exact treaty article still needs to be checked for your particular country.