Synopsis: A US-based NRI faced a massive Rs 46 lakh tax demand due to a buyer using the wrong TDS form during a Pune property sale. The Delhi High Court ruled in his favour, directing the Income Tax Department to rectify records and credit the correct TDS.
Case Overview
In a striking case of procedural error and bureaucratic rigidity, an NRI residing in the United States encountered a heavy tax burden after selling his Pune property for Rs 2 crore in 2015. Although the buyer deducted and deposited Rs 18.68 lakh as TDS, it was filed using Form 26QB — a form applicable only for transactions with resident Indians. For NRIs, the correct form is Form 27Q.
This technical misstep prevented the TDS from appearing in the NRI's Annual Information Statement (AIS), blocking his ability to claim the credit during ITR filing.
The Tax Blow
The NRI, having calculated his capital gains tax liability at Rs 1.91 lakh, paid it as advance tax. However, due to the absence of ITR and missing TDS credit, the Income Tax Department issued a Rs 46.8 lakh demand and initiated penalty proceedings under Section 270A, treating him as non-compliant.
High Court Verdict
In May 2025, the Delhi High Court came to the NRI’s rescue:
- It directed the Income Tax Department to correct the record and reflect the TDS amount in the NRI’s credit.
- The court dismissed the department’s reliance on SOPs that required buyer consent, stating that once the TDS deposit is verified, it must reflect in the seller’s record.
- The HC asked the department to calculate any refund due and nullify prior contradictory orders.
Timeline Recap
- 1998: NRI buys Pune property
- 2015: Sale takes place; Rs 18.68 lakh TDS wrongly filed under Form 26QB
- 2023: I-T notice issued
- 2025: HC ruling directs correction and relief
Disclaimer: This article is for informational purposes only. Readers are advised to consult certified tax professionals or legal advisors for guidance on individual cases.
