We at Manisha Mohol and Associates, are committed to providing our clients with the latest information and ensuring a smooth experience when it comes to financial matters. This time the topic is about property transactions in Goa. This blog post focuses on recent amendments affecting Non-Resident Indians (NRIs) and Overseas Citizenship of India (OCI) card holders buying and selling property in the state. We’ll delve into tax implications, income tax return filing processes, and the importance of voluntary compliance.

Recent Changes and Their Impact

The Income Tax Department (ITD) has implemented stricter regulations for property transactions involving NRIs and OCI card holders. These changes aim to improve transparency and ensure proper taxation. Here’s a breakdown of the key points:

• Data Sharing Between Departments: The ITD now receives data directly from registrars and sub-registrars’ offices. This data includes details of property purchases by NRIs and OCI card holders.
• Enhanced Scrutiny: The ITD and Enforcement Directorate (ED) are working together to trace the source of income for such property purchases.
• Monthly Reports: Authorities receive monthly reports on property transactions, allowing for quicker identification of potential tax irregularities.
• Importance of Residential Status: NRIs and OCI card holders can no longer remain silent about their residential status. The ITD can now take action if discrepancies are found.

Latest Amendments in Property Tax Laws

The Indian government has recently introduced several amendments to tighten the regulations around property transactions involving NRIs and OCI cardholders. These changes aim to ensure transparency and curb illegal financial activities. Key amendments include:

• AIR ( Annual Information Returns) in case of Property Registration : The state government provides Annual Information Returns (AIR) for “high value transactions” through sub-registrar offices to Directorate General of Income Tax (Intelligence and Criminal Investigation) according to Rule 114e of the Income Tax Act since year 2015. The registrar or sub-registrar appointed should furnish information on purchase or sale of immovable property valued at Rs 30 lakh or more.
• Monthly Return to Enforcement Directorate ( ED) : Recently, in addition to AIR, In Goa, state government given direction to sub-registrar offices to submit monthly report to ED for scrutiny for FEMA compliance in case of Property transaction where NRI or OCI card holders are involved. Onus of compliance under FEMA is on Parties involved for property transaction now.
• Tax Deduction where property sold by NRI/OCI card holder : In the case of the Resident Indian Seller, the TDS rate is @ 1% on the Sale Consideration above Rs. 50 Lakh, whereas in the case of NRI/OCI card holder Seller, the minimum limit of Rs. 50 Lakh is not applicable. All property transaction, irrespective of the Sale consideration, attracts TDS provisions u/s 195 of the Income Tax Act.
• Repartiation of sale consideration to foreign Bank :When NRI/OCI card holder sells their property to get the funds abroad for utilisation. In the event of non-deduction of TDS as per rules, the Seller will not be in a position to repatriate the amount of Sale Consideration received to his foreign bank account/NRE account. Further, when the said transaction comes to the notice of the Income-Tax Department, the Seller can be prosecuted for misrepresentation of facts of his/her Tax Residency.
• Increased Scrutiny of Source of Income: The IT Department is focusing on tracing the source of income for property purchases made by NRIs and OCI cardholders. This involves verifying if the funds used are legally obtained and declared.

Understanding Tax Implications for NRIs and OCI Card Holders

• TDS on Property Sale: For NRIs and OCI card holders selling property in India, a Tax Deducted at Source (TDS) applies at a rate of approximately 22.88% on the sale consideration.
• Income Tax Filing: NRIs and OCI card holders with income arising in India, including rental income from property, are required to file income tax returns.

Importance of Voluntary Income Tax Return Filing

Previously, some individuals may not have disclosed their NRI or OCI status to avoid tax liabilities. However, with the new data-sharing measures, such practices are no longer viable. Here’s why voluntary IT return filing is crucial:

• Avoids Penalties and Prosecution: Non-filing of income tax returns can attract significant penalties and even legal action.
• Ensures Compliance: Voluntary compliance demonstrates a responsible approach towards taxation and avoids future complications.
• Reduces Scrutiny: Timely filing can help reduce the chances of unnecessary scrutiny from the ITD or ED.