How do I stop tax being deducted on the full sale price of my Indian flat?
The deduction on a payment to a non-resident is computed on the consideration rather than on the gain, so a property bought long ago and sold at a modest profit can attract a deduction many times the tax actually due. The route out is a certificate obtained in advance, authorising the buyer to deduct at a reduced rate worked out from the computation you put in front of the authority: cost, improvements, the period of holding and the gain you are really making. Without it the buyer deducts on the whole price and the difference is recovered by filing and waiting.
When should I apply for a lower deduction certificate?
Before the payment, and with more margin than most people leave. The certificate works by telling the person paying you what to deduct, and it can only do that if it exists when they pay. In a property sale that means starting while the agreement is being negotiated rather than when completion is a fortnight away, because the application has to be assembled with a supporting computation and the authority takes time to consider it. A buyer who is already nervous about their own liability will not wait, and a certificate that arrives after completion is worth nothing to that transaction.
What does the certificate actually tell my buyer or payer to do?
It authorises deduction at a reduced rate, and it is addressed to the deduction rather than to your final tax. The payer reads the certificate, deducts accordingly and reports it. The reduced amount is still an amount held against your Indian tax for the year, so a return still follows and the position is settled there. It is also specific, to the payer, to the payment or period and to the rate stated, so the payer can rely on it only within those terms. Anything outside them and they are back to deducting on the gross amount.
Can I get a lower deduction certificate after the payment has been made?
No, and that is the whole reason the timing rule matters. A certificate changes what a payer deducts. Once they have deducted and remitted, there is nothing left for it to change. What remains is a refund claim: you file, show the real computation, and wait for the excess to be returned, often for a long time, with the money sitting with the tax authority in the meantime. The same arguments that would have taken an hour in an advance application become a claim you have to pursue.
What do I need to show to get the rate reduced?
The application has to carry the computation the reduced rate is derived from, not just an assertion that the deduction is too high. For a capital transaction that means the cost, what you have spent on the asset since, the dates, how the gain has been worked out and the basis for the rate claimed, along with your Indian identifier, the payer's details, and the residence evidence supporting any treaty position. Clean supporting documents are what makes the difference. Where a figure cannot be traced to a document, expect it to be the thing the application turns on.
Does a certificate cover all my payments or just one?
Read the terms of the certificate. It is granted on the facts you put in the application, meaning a named payer, a payment or a period, and a stated rate, and it does not travel beyond them. Two buyers means the question has to be answered for each. A recurring payment stream means the period covered is the thing to check before the next payment falls due. Payers treat a certificate outside its terms as no certificate at all, which is the right instinct, since they carry the liability if they deduct too little.
Is double taxation illegal?
It is legal. Two countries can each have a valid claim on the same income — one because the income arose there, the other because you live there — and nothing prohibits both from exercising it. What exists instead is relief: tax treaties allocate the claim, and domestic law gives a credit for foreign tax paid. The relief is not automatic, though. It is claimed on a return, and unclaimed relief is simply lost. See how double taxation is relieved.
How do I actually stop being taxed twice?
In this order. Fix your residence under each country's own rules, and if both claim you, apply the treaty tie-breaker. Identify where each type of income is sourced. Read the article that covers that income type, because it decides who taxes and at what maximum rate. Then claim the relief on the residence-country return, with proof of the foreign tax. Most of the tax people lose to double taxation is lost at the last step, not the first. See how double taxation is relieved.
