I am buying a flat from an NRI — do I have to deduct tax?
Yes. A buyer paying a non-resident seller is a payer for these purposes, and the obligation sits on you rather than on the seller or on either side's agent. This surprises almost every individual purchaser, because nothing else in a flat purchase asks a private buyer to act as a collector of someone else's tax. The duty is to determine whether the sum is chargeable and to deduct accordingly before remitting. Get it wrong and the shortfall becomes your own liability, so it is worth settling before any advance changes hands.
Does this apply if I pay a foreign company for software or services?
If you are in India and the sum is chargeable to tax in the hands of the non-resident, the obligation attaches whatever the payment is called. The hard part is rarely the mechanics of remitting. It is the determination of whether a chargeable sum arises and how much, which can turn on what right is actually being paid for and on the treaty with the recipient's country. That determination is yours to make as payer, and a supplier's assurance that their income is not taxable in India is no substitute for it.
What happens to me as the buyer if I deduct nothing?
Two things, and they compound. The tax that should have been deducted becomes recoverable from you, so you can end up paying the seller's tax out of your own funds with no practical route to recover it from someone who has left the country. And where the payment is a business expense, the deduction for that expense can be disallowed, so you lose the expense as well. That combination is why a payer who is unsure should document the basis on which it concluded a payment was not chargeable, rather than simply not deducting.
The seller says they have a certificate — is that enough for me?
A certificate authorising deduction at a lower rate, or none, is exactly what protects you, and it is the only thing that does. Deducting below the default rate on the strength of the seller's own computation, or their advocate's opinion, leaves the shortfall with you. So the working rule for a buyer is simple. No certificate, deduct at the default rate. Certificate, deduct at the rate it authorises and keep a copy with the completion papers. If the seller wants a reduced deduction, the application is theirs to make, not yours.
Who is responsible, me or the bank making the remittance?
The obligation is the payer's. A bank handling the remittance will ask for the paperwork it needs before it moves money abroad, and that requirement is often the first moment a payer discovers the section applies to them at all. But the bank is not standing in your shoes. It will not make the chargeability determination for you and it takes no share of the liability if the determination turns out to be wrong. Treat the bank's checklist as a document requirement and the judgement behind it as your own responsibility.
Do I deduct on an advance, or only at completion?
The obligation attaches to the payment, so an advance is within it. This is the commonest way an individual buyer falls into default. A token or booking amount goes across early, before anyone has considered withholding, and the deduction is then permanently missing on that slice. If you know or suspect the seller is a non-resident, settle the position before any money moves, including anything paid into an escrow arrangement or sent directly to an account the seller holds outside India.
What is FIRPTA withholding?
FIRPTA is the US regime that treats a foreign person's disposition of a US real property interest as taxable and makes the buyer withhold on the gross proceeds to secure it. Because the deduction is on the price rather than the profit, it routinely exceeds the real tax — sometimes on a sale made at a loss. A withholding certificate applied for before closing can reduce it to something closer to the actual liability. See the FIRPTA withholding certificate.
Who qualifies for the Foreign Earned Income Exclusion?
A US citizen or resident with a tax home outside the United States who meets one of two tests: bona fide residence in a foreign country for an uninterrupted period including a full tax year, or physical presence abroad for a qualifying number of days in a twelve-month window. The day count and the exclusion cap both come off Form 2555 for the year in question. Failing both tests does not end relief — the foreign tax credit is the alternative. See Form 2555.
