I am buying a flat from an NRI — do I have to deduct tax?
Yes. Where the seller is a non-resident, the obligation under section 195 falls on you as the buyer. It is not a formality the conveyancing takes care of: you deduct from the payment, deposit the amount against the seller's tax identifier, and report the deduction. The seller's own view of the tax due does not relieve you of it. In practice the sequence has to be arranged before completion, because the money must leave your hands already reduced. Recovering a deduction you forgot to make, from a seller who has been paid in full, is a very different problem.
Is the deduction on the sale price or on the seller's profit?
On the price. The deduction is computed on the consideration you pay, not on the gain the seller makes. Since the gain is usually a fraction of the price, the amount withheld routinely exceeds the tax the transaction actually owes, and the difference sits with the Indian exchequer until the seller files and reconciles it. That is not a fault in the mechanism; it is the mechanism. It is also why sellers ask buyers to withhold less, and why a buyer has no power to agree to that on their own.
What happens to me if I deduct too little?
The shortfall becomes your problem, not the seller's. A buyer who deducts too little, deposits late, or deposits against the wrong identifier is exposed in their own name, and the seller has by then been paid. This is the part of the transaction buyers consistently underestimate: you take on a withholding agent's liability by signing an agreement with a non-resident seller. The protection is procedural. Get the seller's tax identifier verified, get the deduction computed before completion, and keep the proof of deposit and the reporting with the property papers.
The seller says no deduction is needed — can I rely on that?
No. A seller's assurance carries no weight against your own obligation. The only thing that reduces the deduction is a certificate from the Indian tax authorities authorising a lower rate, obtained by the seller before the transaction, naming the payer, the payee and the period it covers. Without that certificate you have no discretion to withhold less, however convincing the seller's computation looks. If the seller intends to apply for one, that application belongs in the transaction timetable, because it cannot be produced after the money has moved.
Do I need my own tax deduction account to buy from an NRI?
Yes, and it is the step that most often holds a completion up. Deducting and depositing requires the buyer to hold a deduction account in their own name, and the deposit is made against the seller's identifier using it. Buyers who have never deducted tax before generally do not have one, and applying for it in the last week before completion is how deadlines get missed. Start with the account, then the computation, then the question of whether the seller is applying for a certificate, in that order.
Can I deduct less because the seller says he made a loss?
Not on your own. Whether the seller has a large gain, a small one or none at all is a question about the seller's tax, and your deduction under section 195 is not computed on it. Only a certificate authorising a lower or nil deduction, granted before the transaction, lets you depart from the ordinary rate, and the seller obtains it by putting the computation and the cost evidence in front of the tax authorities rather than in front of you. If the money has already been withheld, the seller's route is an Indian return.
How do families with assets in two countries handle inheritance?
With paperwork built for both systems rather than one. In practice that means wills that work where each asset actually sits, an executor with authority a foreign bank or land registry will accept, clearance certificates before the estate distributes so the executor is not left personally exposed, and an estate tax exposure calculation done while the person is alive and can still act on it. Doing it afterwards costs more and forecloses most of the options. See cross-border wills and trusts.
How do I claim tax treaty benefits?
Two moments, and the earlier one matters more. Before a payment is made, you give the payer a declaration so they withhold at the treaty rate rather than the domestic one — a W-8BEN for a US payer, an NR301 for a Canadian payer, a residency certificate and Form 10F for an Indian one. After the year ends, you claim the position on a return, and the United States often wants it disclosed there in its own right. Claiming late means asking for a refund instead. See NR301 declarations.
