Subject  : Selling Property in India – Parent demise, two Children Settled abroad

Note on Property Funds Transfer  

26/03/2023 12:35:03

Background : The situation is as below:

One of my uncle (widower) passed away last week.

They have one property in Pune, Maharashtra

He is survived by 2 sons and 1 daughter out of which 1 son is in India and rest two children are overseas (NRI now)

My uncle did not leave any “will” behind.

So now we will get the property transferred in name of 3 children (equal share).

Finally they want to sell this property.

Questions are

How can the NRI children receive their part of share from sale proceeds ? Do they need to set up NRI account in India first? For sure no buyer is going to remit them overseas as it is tedious process.

What will be tax implications on NRIs once they receive this money ?

Solutions

There are different options

Let us see, these along with pro’s and con’s

This will enable the family to take the best call

Option 1

Part 1A : How to have a clear title

First involve Lawyers and Courts, and get Probate in favour of three children jointly, with 1/3^rd share each

Then, allow them to sell jointly

Buyer gets the property including court judgement ( so , title is clear ), and seller three people get their money

Part 1B : TDS part of this

TDS will be 1% for the Indian resident son

And TDS will be 20% on the sale value… for the two NRI sellers (relatively bigger amount)

Part 1C : Funds transfer leg of the above

The NRI’s if take money in India

Open bank account in India

For that need a PAN in India

Can either will need a PAN in India

And file return in India

And then maybe get refund in India, if applicable, after return filing in India

The NRI’s if take money directly outside India

Get money directly outside India

Technically possible

Yes, the buyer’s bank can transfer funds to abroad.. but yes, it will be slightly more effort for the buyer.

Part 1D : Return filing in India for NRI’s

In both situations, the NRI’s are selling the property in their own name, so, TDS is on their PAN, and so

They must file return in India ( since anybody with more than Rs 25000 TDS has to file return in india , as per law amended 2022 July

Refund of tax ?

Yes, possible, based on actual facts and actual calculations. So, NRI’s may get refund in India, if applicable, after return filing in India. ( after tax calculation)

So, again will / can open a account in india

It will also be tight, if they don’t have address proof in India ( to check )

And bank will be in which status ? Resident or non resident ?

 

What is the other option ?

It has its own pro’s and con’s

So, have a look at this also

Plan 2

All 3 children file documents in the court, and declare in a family settlement in favour of the Indian son.

Indian Son becomes the sole owner of the property

He can sell the property in India,

TDS is just 1%

Gets the money

And later / before he can gift some funds to his foreign brother / sister

NRI’s benefit

No TDS

No return

No bank account in India

No other work in India

No future obligation in India

No Tax

Buyer’s benefit

Easy to buy, easy TDS, easy transfer

Indian Son

Controller for the temporary phase

Funds safety ?

Go into an imprest account / escrow account

Maybe jointly controlled by the 3^rd party ( anybody on whom all have faith )

And clarity that funds from this account will be used as per joint decision

Resources

https://www.mastersindia.co/blog/itr-filing-mandatory-if-tds-tcs-rs-25000-or-more/

Now, according to the new provisions, if an individual’s aggregate tax deducted at source during the previous year’s assessment is twenty-five thousand rupees (Rs. 25,000) or more, the person is supposed to file Income Tax Returns even if that person’s taxable income is less than the maximum amount which is not chargeable to income tax under the Income Tax Act.

However, this rule is different for senior citizens. For senior citizens, the limit is fifty-thousand rupees (50,000 Rs.).

And the PAN to be surrendered after 2 years , if the NRI has no plan to come every to India

https://www.bankbazaar.com/pan-card/how-to-surrender-pan-card.html

and

https://www.paisabazaar.com/pan-card/how-to-surrender-pan-card/

Audit in Finsys ERP Environment needs which skills ( Hand’s-on for Audit team)

Voucher audit

• Purchase Daybook, column format
• Purchase Daybook, voucher format, if and where required .. ( services like 57 series, RCM vouchers, etc)
• Sales Daybook, for audit of Sales invoices… see if any invoice edited after printing / files / sending , by any error / any deleted
• Journal Daybook ( Voucher format is best) .
• Not : In tally dunia, Journal is everything apart from Purchase… but in Finsys due to excellent automation and automatic 3B preparation, automatic TDS, automatic RCM, Automatic many other things, a scientific system of 50,51,52,57, 5A, 5B etc is there
• see this link below for details : https://finsys.co.in/manuals-accounts-and-finance-module-finsys-erp

• The biggest / most important thing to check in audits now a days is TDS compliance, and GST compliance
• at the voucher level you must see…… TDS is there wherever required, don’t miss it. And TDS is proper rate, proper section and posted properly
• Hence MLG team always recommends that the Voucher must be printed and pinned on the top of the vendor’s invoice… in tally environment people sometimes only mark “entered” on the invoice, this is not good… or mark the voucher number/date on the invoice, this is also not sufficient,  Since auditor will not be able to see if the TDS posting is proper or not. GST is taken in eligible or ineligible. GST is taken in C or S or I… all this is visible in printout form only.

Ledger Review audit

• Purchase side ledger review
• Sale side ledger review
• Expenses side ledger review
• Loans side ledger review
• Creditors side ledger review
• Debtors
• and so on

MLG BPO, KPO, the Business Outsourcing Team.

Making Your Business Better

for Careers with MLG BPO / KPO / Audit Teams, contact us

Capacity Building Workshop “Important To-do things in Accounts Department in April 2022” organized by IamSMEofIndia

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Sh. M L Gupta, Founder MLG Team, graced the Dias with his presence . Sh. Sangeet Kr Gupta was of the Main Technical Speaker at event.

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Sh. Rajiv Chawla, Chairman of IamSMEofIndia, was the Moderator and Keynote Speaker.

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Sh. M L Gupta, Founder MLG Team, graced the Dias with his presence . Sh. Sangeet Kr Gupta was of the Main Technical Speaker at event.

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Topics Covered

1. Things you must do in April 2022 for a Better Balance Sheet, – Current Ratio, Debt Equity Ratio, DSCR Ratio
2. Term Loan repayment, is that a good idea ?
3. CC Limit vs OD limit against Property – Which is better ? and when ?
4. GST – Actions you must do now in March 2022
5. TDS and TCS – Actions you can take, to make yourself safer
6. Fixed Assets – Measure you can do, should do Now
7. Importance of Funds Flow – How to show to your management. Key Points.
8. Importance of CARO Report – many important para’s for 2022 ( First time ever )

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Thanks so much for your overwhelming response!

What a great beginning to the new Financial Year!!

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It was the first important Training program in this FY to help prepare our members for faster growth.

Capacity Building Program for better Accounts and Finance Management

Special Tips for Accounts and Finance for more prosperous 2022-23

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An out-of-the-box program that prepared Entrepreneurs & their Finance/ Accounts Teams to make the New Financial Year stress free and prosperous, giving lessons and tips like never before, adding immense value, guaranteeing unprecedented savings.

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MLG is Proud to be Associated with IamSMEofIndia

Proud to say : IamSMEofIndia

Cost Audit Non Compliance

As per Law, the Cost Audit is compulsory in certain cases (Turnover over Rs 100 Crores p.a.)

Cost records are compulsory , for Turnovers over certain limits for certain specified industries.

This is a rare case of conviction for violation of provisions of the Companies Act. The Economic Offences Wing Court in Hyderabad has found Ameya Laboratories and its managing director guilty of failing to file a cost audit report to the Registrar of Companies (ROC).

https://www.thecompanycheck.com/company/ameya-laboratories-limited/L24230TG1996PLC023283

The company conducted sales or supplied products worth Rs 269 Crores, but did not file the report within the stipulated time.

Both prosecutions were filed by the Registrar of Companies, Hyderabad for non-filing of cost audit reports to the central government within a stipulated period as per Companies Act, 2013 under Section 233(b) for 2012-13 and 2013-14 fiscals. According to the preceding fiscal filed with ROC, the company’s turnover from sales or aggregate value of the turnover from the sale or supply of products as evident from profit and loss on March 31, 2011, was Rupees 269 Crores, making it liable to file a cost audit report to the central government.

ROC officials said that both cases were proved by the prosecution, and these are the fourth and fifth successful prosecutions, resulting in the convictions and imprisonment of the accused.

However, this is a rare case where an accused has been given rigorous imprisonment under the Companies Act for non-compliance.

The company has been found guilty and sentenced to pay a fine of Rs 3,000, while the Managing Director has been sentenced to rigorous imprisonment for five months and directed to pay a fine of Rs 2,000.

Under the Companies Act, companies with a turnover exceeding a specified amount are required to file a cost audit report to the central government. The objective of this requirement is to ensure that companies are maintaining adequate cost records and that their cost accounting practices are in compliance with the established norms.

According to Section 233(b) of the Companies Act, every company engaged in the production, processing, manufacturing or mining activities and whose annual turnover exceeds the threshold limit, as prescribed by the central government, is required to get its cost accounting records audited in the manner specified by the government.

The Companies Act also mandates that the cost audit report must be filed with the Registrar of Companies (ROC) within the stipulated time period. Failure to do so is considered a violation of the Companies Act and can result in penalties and even imprisonment, as in this case here.

Read More: https://www.taxscan.in/hyderabad-eow-court-convicts-md-for-non-filing-of-cost-audit-reports/260791/

Members are suggested to get themselves complied with in the Cost Records and Cost Audits area too.

This was a Sick company,

already shut down as per this site on rediff.com.  This was a listed company in 2011 to 2016. then it apparently shut down. See the link below.

https://money.rediff.com/companies/Ameya-Laboratories-Ltd/12540667/results-annual?src=comp_research

 

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