Form 10BE & Form 10BD (Forms 114 & 113): Complete Guide for Donors and NGOs (FY 2025–26 & FY 2026–27) Part 2

 By Ca Surekha Ahuja

Part 2: Protecting Donation Deduction in ITR, Assessment Risks, Mismatch Resolution and Practical Compliance Guide

Part 1 explained the compliance framework of Form 10BE and Form 10BD, including the responsibilities of donors and charitable institutions.

The next practical question is:

After making a donation and receiving the certificate, how can a donor ensure that the deduction claim remains protected?

A genuine donation deserves a genuine tax benefit. However, the benefit is secured only when the entire compliance chain is complete.

The Donation Deduction Protection Framework

A donor's claim is strongest when the following five links are properly connected:

Compliance Link	What It Ensures
Donation made to eligible institution	Donation qualifies under applicable provisions
Payment trail available	Genuineness of transaction is established
Institution reports donation correctly	Records match with tax department reporting
Form 10BE/Form 114 available	Prescribed certificate supports the claim
Correct ITR disclosure	Deduction is properly claimed

A missing link can result in unnecessary clarification during return processing or assessment.

How to Claim Donation Deduction in ITR?

Form 10BE/Form 114 is a supporting document. It is not required to be uploaded with the Income-tax Return.

The donor should:

• enter eligible donation details in the applicable schedule;
• claim deduction as per the provisions applicable to that donation;
• retain Form 10BE/Form 114 and supporting documents.

The deduction should be claimed only after verifying:

• institution details;
• donation amount;
• eligibility category; and
• supporting documents.

What Details Should Be Checked Before Filing ITR?

Before claiming deduction, the donor should verify:

Particular	Verification Required
Name of institution	Should match certificate and records
PAN of institution	Should be correctly mentioned
Donation amount	Should match payment proof
Date of donation	Should relate to correct financial year
Deduction amount	Should be computed as per applicable rules

A simple reconciliation before filing the return can avoid future disputes.

Assessment Perspective: What May Be Verified?

During processing or assessment, the tax authorities may examine whether:

1. The Donation Was Genuine

The donor should be able to establish:

• actual payment;
• identity of institution;
• supporting certificate; and
• proper reporting.

2. The Institution Was Eligible

The donor should ensure that the institution was eligible to receive donations qualifying for deduction under the relevant provisions.

3. The Reporting Trail Matches

The following should be consistent:

Donation payment
↓
Donation receipt
↓
Form 10BE/Form 114
↓
Institution reporting
↓
ITR claim

Red Flags for Donors

Before claiming a donation deduction, taxpayers should be cautious where:

⚠ Donation is made to an unknown or unverified institution.

⚠ A large donation is claimed without proper documentation.

⚠ The receipt amount differs from payment records.

⚠ Form 10BE/Form 114 is not available.

⚠ The institution requests incorrect donor details.

⚠ Donation is made through untraceable modes.

A genuine donation with proper records generally avoids unnecessary complications.

Common Issues and Practical Solutions

Issue 1: Form 10BE/Form 114 Not Received

Situation - The donor has made payment and received only a donation receipt.

Practical Solution

The donor should request Form 10BE/Form 114 from the institution before finalising the tax claim, particularly for substantial donations.

Issue 2: PAN Mismatch

Situation - The donor's PAN is incorrectly reported by the institution.

Risk - The donation may not reconcile properly during verification.

Solution

The donor should:

• inform the institution;
• provide correct PAN details;
• obtain corrected documentation.

Issue 3: Difference Between Payment and Certificate Amount

Situation- Bank records show ₹5,00,000 donation, but certificate reflects ₹50,000.

Solution

The donor should:

1. Preserve bank/payment proof.
2. Contact the institution.
3. Request correction.
4. Retain revised documents.

Issue 4: Donation Not Properly Reported by Institution

A donor may have fulfilled all obligations, but the institution may have made an error in reporting.

The donor should maintain evidence showing:

• genuine payment;
• certificate received;
• communication with institution; and
• correction request, if required.

Issue 5: Donation Made at Year End

March donations require additional attention.

Both donor and institution should verify:

• date of payment;
• financial year;
• accounting entry;
• reporting details.

Year-end errors are among the most common causes of mismatch.

Consequences Where Form 10BD/Form 113 Compliance Is Not Proper

The institution responsible for filing the statement may face:

Late Fee - Applicable late fee may arise:

₹200 per day of default

subject to prescribed limits.

Penalty - Penalty provisions may apply:

₹10,000 to ₹1,00,000

depending on facts and circumstances.

However, donors should remember:

A penalty imposed on the institution does not automatically validate every donor claim.

The donor should maintain independent evidence supporting the deduction.

Guidance for NGOs Before Closing Annual Compliance

A professional compliance review should include:

Donor Data Review

✓ Verify PAN details
✓ Check donor names
✓ Review large donations
✓ Identify incomplete records

Accounting Reconciliation

✓ Match donation register with books
✓ Match receipts with bank credits
✓ Review year-end donations
✓ Reconcile reported figures

Final Review

✓ Validate donor-wise details
✓ Complete filing within due date
✓ Issue certificates promptly
✓ Preserve records and acknowledgement

Special Guidance for Corporate Donors

Companies claiming donation deductions should maintain a stronger documentation file.

The file should generally contain:

• approval/authorisation documents wherever applicable;
• payment evidence;
• institution details;
• Form 10BE/Form 114;
• accounting records;
• ITR disclosure details.

For significant donations, review should be completed before filing the return rather than during assessment.

FAQs: Form 10BE and Form 10BD Practical Issues

Q1. Can I claim deduction if I do not have Form 10BE?

It is advisable to obtain Form 10BE/Form 114 before claiming significant deductions, as it provides prescribed support for the claim.

Q2. Do I need to upload Form 10BE with my ITR?

No. It should be retained as supporting evidence.

Q3. Is Form 10BE issued by the donor or NGO?

It is issued by the eligible institution receiving the donation.

Q4. What if the NGO has reported incorrect PAN?

The donor should request correction from the institution and preserve supporting communication.

Q5. What if donation amount in Form 10BE is incorrect?

The institution should rectify the error as per the applicable procedure and issue corrected details.

Q6. Is payment proof necessary after receiving Form 10BE?

Yes. Form 10BE and payment proof together provide stronger evidence.

Q7. Can UPI donation qualify for deduction?

Yes, subject to fulfilment of applicable conditions and proper documentation.

Q8. Are all donations eligible for deduction?

No. Eligibility depends on the nature of donation, institution approval and conditions prescribed under the law.

Q9. Should NGOs maintain donor records even after filing Form 10BD?

Yes. Records should be preserved for future verification and compliance purposes.

Q10. What is the biggest mistake donors should avoid?

Claiming a large deduction without verifying documentation and institution details.

Final Professional Guidance

A donation begins with generosity, but a tax benefit is protected through compliance.

For donors:

Proper documentation ensures that their genuine contribution receives the benefit intended under the Income-tax law.

For NGOs:

Accurate reporting is not merely a statutory requirement; it is a responsibility towards every donor who supports their mission.

The best practice is simple:

Verify before donating.
Reconcile before filing.
Preserve before assessment.

A transparent donation system is created when generosity is supported by accountability.

Compliance does not reduce the spirit of charity; it strengthens trust between donors, institutions and the tax system.

---

Form 10BE & Form 10BD (Forms 114 & 113): Complete Guide for Donors and NGOs (FY 2025–26 & FY 2026–27)

 By CA Surekha Ahuja

Donation Certificates, 80G Deduction, NGO Compliance, Due Dates and Practical Solutions

A Donation Is More Than a Receipt

A donation represents trust.

A donor trusts a charitable institution to use the contribution for a meaningful purpose. At the same time, the donor expects that the tax benefit available under the Income-tax law is properly supported.

A common question asked by taxpayers is:

"I have made a donation and received a receipt. Can I claim the deduction in my Income-tax Return?"

The answer is:

Not always.

A donation receipt confirms that the institution has received the contribution. However, for claiming deduction under the Income-tax law, the donor should also ensure that the prescribed reporting and certification requirements are completed.

For eligible institutions:

• Form 10BD is the statement filed with the Income-tax Department reporting donations received.
• Form 10BE is the certificate issued to the donor supporting the deduction claim.

Under the Income-tax Act, 2025, the corresponding forms are:

• Form 113 replacing Form 10BD; and
• Form 114 replacing Form 10BE.

The objective remains unchanged:

The institution reports the donation. The donor receives the certificate required to support the tax deduction.

This guide explains the practical compliance requirements for donors, NGOs, trusts, institutions and tax professionals for FY 2025–26 and FY 2026–27 onwards.

Quick Summary: What You Need to Know

If you are	What you should do
Individual donor	Obtain Form 10BE/Form 114 and preserve payment proof.
Company/HUF donor	Ensure the donation claim is supported by proper documentation and reconciliation.
NGO/Trust/Institution	File Form 10BD/Form 113 and issue Form 10BE/Form 114 within the prescribed time.
Tax professional	Reconcile donation records, certificates and return disclosures before filing.

Form 10BE and Form 10BD: The Basic Difference

Many donors and institutions confuse these two forms.

The easiest way to remember:

Form 10BD goes to the Income-tax Department.

Form 10BE goes to the donor.

Particular	Form 10BE	Form 10BD
Meaning	Donation certificate	Statement of donations received
Purpose	Supports donor's deduction claim	Reports donations to the Income-tax Department
Prepared by	NGO/Trust/Institution	NGO/Trust/Institution
Filed with Department	No	Yes
Issued to donor	Yes	No
Responsibility	Donee institution	Donee institution

Forms 113 and 114 Under Income-tax Act, 2025

The Income-tax Act, 2025 introduces a new structure and renumbering of provisions and forms.

For FY 2026–27 onwards:

Existing Form	Corresponding Form under Income-tax Act, 2025	Purpose
Form 10BD	Form 113	Statement of donations received by the institution
Form 10BE	Form 114	Certificate issued to the donor

For practical understanding, taxpayers may continue to search for Form 10BE and Form 10BD, as these terms remain widely used. However, professionals and institutions should refer to the applicable forms prescribed for the relevant financial year.

CA Surekha's Practical Insight

During transition periods, the biggest compliance risk is not the law itself but using an outdated form or process. Institutions should always verify the applicable form before filing for the relevant financial year.

Who Has to Comply?

The responsibility is primarily on the donee institution.

Responsibilities of NGOs / Trusts / Institutions

They must:

✓ Maintain complete donor records.
✓ File Form 10BD/Form 113 with donor-wise details.
✓ Issue Form 10BE/Form 114 to eligible donors.
✓ Maintain supporting documents.

Responsibilities of Donors

They must:

✓ Donate to eligible institutions.
✓ Provide correct PAN and personal details.
✓ Obtain Form 10BE/Form 114.
✓ Preserve payment proof.
✓ Claim deduction correctly in the Income-tax Return.

A donor does not file Form 10BE, Form 10BD, Form 113 or Form 114.

Who Is Required to File Form 10BD / Form 113?

The reporting obligation applies to eligible institutions receiving donations that qualify for deduction claims.

These may include:

• charitable trusts;
• institutions approved under section 80G;
• universities and educational institutions eligible under the Income-tax law;
• research institutions eligible under section 35; and
• other approved entities covered by the applicable provisions.

Before issuing certificates, institutions should ensure that their approval or registration remains valid.

Due Date for Filing and Issuing Certificates

The institution is generally required to complete both compliance steps:

1. Filing the donation statement; and
2. Issuing the donation certificate to donors.

The general due date is:

31 May following the end of the relevant financial year.

Financial Year	Due Date
FY 2025–26	31 May 2026
FY 2026–27	31 May 2027*

*Subject to any extension or notification issued by the Government.

CA Surekha's Practical Insight

NGOs should not treat 31 May as the starting point of compliance. The reconciliation process should ideally begin immediately after the financial year closes. Most errors arise due to incomplete donor details collected during the year.

Practical Compliance Guide for NGOs

A systematic approach can prevent most compliance issues.

Step 1: Maintain Proper Donor Records

Every institution should maintain:

• donor name;
• PAN;
• address;
• date of donation;
• amount donated;
• mode of payment;
• receipt number; and
• bank reference.

The quality of Form 10BD/Form 113 depends entirely on the quality of donor data maintained during the year.

Step 2: Verify Donor Details

Before issuing certificates, verify:

✓ Correct spelling of donor name.
✓ Correct PAN.
✓ Correct donation amount.
✓ Correct financial year.
✓ Correct payment details.

A small spelling mistake or wrong PAN can create unnecessary difficulty for the donor.

Step 3: Reconcile Before Filing

Before filing Form 10BD/Form 113:

Compare:

• donation register;
• books of account;
• bank statements;
• donation receipts; and
• donor details.

Special attention should be given to:

• March donations;
• large-value donations;
• donations received near year-end; and
• donations where donor information is incomplete.

Step 4: File Statement and Issue Certificates

After reconciliation:

• file Form 10BD/Form 113 within the due date;
• issue Form 10BE/Form 114 to donors;
• retain acknowledgement and supporting records.

Practical Compliance Guide for Donors

For donors, compliance is simple but important.

Before Making Donation

✔ Verify that the institution is eligible to issue donation certificates.
✔ Provide your name exactly as per PAN records.
✔ Provide correct PAN details.

At the Time of Donation

Prefer payment modes that create a clear trail:

• bank transfer;
• UPI;
• cheque; or
• other traceable banking channels.

Obtain: donation receipt; and Form 10BE/Form 114.

While Filing Income-tax Return

Remember:

• Do not upload Form 10BE/Form 114 with the ITR.
• Enter donation details in the relevant schedule.
• Preserve documents for future reference.

Practical Example

Situation:

Mr A donated ₹1,00,000 to an approved charitable institution during FY 2025–26.

The institution issued a donation receipt immediately. However, while filing Form 10BD, the PAN was entered incorrectly.

Result: Mr A may have made a genuine donation, but the mismatch can create unnecessary questions while processing or assessing the deduction claim.

Solution: Verify details before filing:

• donor name;
• PAN;
• donation amount; and
• payment records.

A two-minute verification can prevent months of follow-up.

Is a Manual Form 10BE Valid?

A manually prepared Form 10BE may be acceptable where permitted, provided the information is accurate and matches the reported details.

The important requirement is consistency between:

1. Form 10BE/Form 114 issued to donor;
2. Form 10BD/Form 113 filed by the institution; and
3. Actual payment records.

The format matters less than accuracy and reconciliation.

Common Mistakes by NGOs and Donors

Common Mistake	Impact	Better Practice
Incorrect PAN	Certificate mismatch	Verify PAN before issuing
Wrong donation amount	Deduction issue	Reconcile with bank records
Delay in filing	Late fee and penalty exposure	Complete compliance early
Missing Form 10BE	Donor difficulty	Issue certificates promptly
Incorrect financial year	Wrong reporting	Verify donation date

Key Takeaways

✓ Form 10BD/Form 113 is filed by the institution, not the donor.
✓ Form 10BE/Form 114 is issued to the donor by the institution.
✓ Donation receipts alone may not be sufficient for claiming deduction.
✓ Accurate PAN, amount and donor details are critical.
✓ Proper compliance protects both NGOs and donors.

Continued in Part 2

Part 2 will cover:

• Claiming donation deduction in the Income-tax Return.
• Penalties and consequences.
• What happens if Form 10BE and Form 10BD do not match.
• Correction mechanism.
• Detailed FAQs.
• Donor and NGO compliance checklists.
• Final professional guidance.

Will vs Gift Deed: Complete Succession Planning Guide for Families with Resident and NRI Heirs (Part 2 of 2)

By CA Surekha S. Ahuja

The transfer of Indian property within resident and non-resident families involves a careful interplay of succession law, property law, taxation and FEMA regulations. This article reflects the provisions of the Income-tax Act, 2025 applicable from Assessment Year 2026–27. Stamp duty, registration requirements, probate and succession laws are governed by the applicable State laws and other relevant legislation. Readers should verify the latest legal position from the Income Tax Department's official portal and seek professional advice before implementing any succession or estate-planning strategy.

Why This Guide Matters

In Part 1, we examined an important but often overlooked reality—resident and NRI heirs may not face identical tax consequences when they ultimately sell the same inherited property.

We discussed:

• the difference in capital gains taxation;
• higher withholding requirements under Section 195 for NRI sellers;
• the importance of obtaining a Lower Deduction Certificate before sale;
• DTAA relief;
• reinvestment provisions;
• CGAS compliance; and
• the significance of determining the correct cost of acquisition and fair market value wherever applicable.

The next question naturally follows.

If tax consequences differ at the time of sale, how should parents transfer the property in the first place?

Should they execute:

• a Will,
• a Gift Deed,
• a Family Settlement, or
• leave the property jointly to their children?

Many families assume that choosing one method over another will substantially reduce future tax liability.

In most situations, that assumption is incorrect.

The transfer instrument primarily determines ownership, flexibility, succession planning and family certainty, whereas the future tax liability generally depends upon the law applicable when the heir eventually sells the property.

Accordingly, selecting the appropriate transfer mechanism is principally an estate-planning decision rather than a capital gains tax planning exercise.

Quick Answer: Which Transfer Method Is Generally Preferable?

Issue	Practical Position
Maximum flexibility	Will
Immediate transfer during lifetime	Gift Deed
Settlement amongst family members	Family Settlement
Mixed Resident and NRI families	A properly drafted Will with clearly defined ownership shares often provides the greatest flexibility
Future capital gains tax	Generally depends upon the residential status of the heir and the law applicable at the time of sale—not merely on the transfer instrument

The Estate Planning Principle Every Parent Should Understand

Parents frequently spend considerable time deciding whether to execute a Will or a Gift Deed, believing that one option will necessarily reduce the future tax burden on their children.

In reality, the method of transfer generally does not determine the capital gains tax payable when the inherited property is eventually sold.

The future tax consequences are ordinarily influenced by factors such as:

• the residential status of each heir;
• the applicable provisions of the Income-tax Act, 2025;
• the period of holding;
• the cost of acquisition;
• availability of exemption provisions;
• compliance with TDS requirements; and
• FEMA regulations wherever applicable.

Planning Implication

Parents should first determine how they wish to distribute ownership, and only thereafter examine the resulting tax implications. Designing an estate plan solely around perceived tax savings often leads to avoidable complications and family disputes.

Will vs Family Settlement vs Gift Deed – A Practical Comparison

Particulars	Will	Family Settlement	Gift Deed
When ownership passes	After the death of the testator	Immediately	Immediately
Can it be modified?	Yes, during the lifetime of the testator	Normally difficult after execution	Generally irrevocable once validly executed
Registration	Optional, though registration is often advisable	Generally required where rights in immovable property are created or extinguished	Mandatory
Stamp duty	Generally no stamp duty on execution of a Will	Governed by State law	Governed by State law
Probate	May be required in specified cases depending upon the applicable succession law	Usually not required	Not applicable
Tax implications at transfer	Generally none	Generally none in a genuine family arrangement	Gifts to specified relatives are generally exempt under Section 56(2)(x)
Primary advantage	Flexibility	Immediate certainty	Immediate transfer of ownership

When Is a Will Generally the Better Choice?

A Will is often the most suitable succession planning instrument where parents wish to:

• retain ownership and control during their lifetime;
• revise the distribution if family circumstances change;
• provide unequal shares where justified;
• deal separately with multiple properties and financial assets; or
• accommodate future changes in the residential status of children.

Perhaps the greatest advantage of a Will is flexibility.

So long as the testator remains legally competent, a Will may ordinarily be amended, replaced or revoked at any time.

Planning Implication

Where children may later settle abroad, return to India or experience changes in financial circumstances, a Will usually provides considerably greater flexibility than an irrevocable Gift Deed.

When Can a Family Settlement Be Appropriate?

A Family Settlement may be appropriate where:

• all stakeholders have already agreed on the proposed distribution;
• family disputes require resolution;
• ownership needs to be regularised immediately; or
• family members prefer certainty without waiting for succession to take effect after death.

Properly documented family settlements have frequently helped families avoid prolonged litigation while preserving long-term relationships.

When Should a Gift Deed Be Considered?

A Gift Deed may be appropriate where:

• immediate transfer of ownership is genuinely intended;
• the transfer is made in favour of specified relatives covered by Section 56(2)(x);
• parents no longer require ownership or control of the property; and
• the family understands that the transfer is generally irrevocable.

However, because ownership passes immediately, parents should carefully evaluate their own financial security before gifting away valuable assets.

CA's Practical Tip

Many parents execute Gift Deeds believing they are simplifying succession.

In practice, a carefully drafted Will often achieves the same objective while allowing parents to retain complete control over their assets throughout their lifetime.

Can One Child Receive the House and the Other Receive Cash?

This question arises frequently in families where:

• one child resides permanently in India; and
• another child has settled abroad.

Parents often ask:

Can the entire residential property be left to one child while the other receives cash or other financial assets of equivalent value?

The answer is Yes.

Indian succession law generally permits such arrangements, provided they are properly documented and the intention of the parents is clearly recorded.

The distribution may be made through:

• a Will;
• a Family Settlement; or
• any other legally valid succession arrangement.

The key objective should be fairness, clarity and ease of administration, rather than mechanical equality in every asset.

Common Structures Adopted by Families

Structure	Practical Position
Entire house to one child and cash to another	Legally permissible through an appropriately drafted succession document
Joint inheritance	Both children inherit specified ownership shares
Different assets for different heirs	One child receives immovable property while another receives financial investments or business assets

Each approach has advantages depending upon:

• the composition of family assets;
• residential status of the beneficiaries;
• future financial requirements; and
• long-term succession objectives.

Planning Implication

Equal treatment does not necessarily require each child to receive an identical asset. In many families, allocating different assets of broadly comparable value provides a more practical and efficient succession outcome.

Gifts Between Family Members

Section 56(2)(x) provides that gifts received from specified relatives are generally not taxable in the hands of the recipient.

Broadly:

Relationship	General Position
Parent and child	Generally exempt
Spouses	Generally exempt
Brothers and sisters	Generally exempt
Lineal ascendants and descendants	Generally exempt
Non-relatives	May be taxable under Section 56(2)(x), subject to applicable provisions

Accordingly, transfers within the immediate family ordinarily do not result in tax under these provisions.

However, the statutory definition of "relative" should always be examined carefully before implementing any transfer arrangement.

(Continued in Part 2B: Joint Ownership, Stamp Duty, Practical Action Plan, Common Mistakes, FAQs and Bottom Line.)

NRI Property Tax India 2025: The Capital Gains Trap Families With Mixed Resident and NRI Heirs Cannot Afford to Miss

 By CA Surekha S Ahuja

The  resident and non-resident families on cross-border inheritance, property taxation and succession planning is a little ticklish. This article reflects the provisions of the Income-tax Act, 2025 applicable from Assessment Year 2026-27. Tax laws may change; readers should verify the latest position from the Income Tax Department’s official portal and consult a qualified tax professional before taking any decision.

Why This Guide Matters

If your family owns property in India and your children are divided between those living in India and those living abroad, you may have a hidden tax planning challenge that many families discover only after the property is sold — when a substantial amount of money gets blocked as TDS.

The Income-tax Act, 2025 (applicable from AY 2026-27) simplified the headline capital gains rate for many property transactions to 12.5%. However, beneath this apparent simplicity lies an important difference:

Resident heirs and NRI heirs are not always taxed in the same manner when they sell inherited or gifted property.

This difference can significantly impact:

• the amount of tax payable,
• cash blocked as TDS,
• ability to reinvest and claim exemption,
• repatriation of sale proceeds,
• and the ultimate wealth transferred to the next generation.

This guide — Part 1 of a two-part series — explains the tax architecture that families must understand before transferring or selling inherited property.

Part 2 will cover the transfer strategy:

• Will vs family settlement vs gift,
• allocating property to one child while compensating another,
• whether joint ownership is beneficial,
• and succession planning strategies for families with resident and NRI heirs.

Who This Guide Is For

This guide is especially relevant for:

• Parents planning transfer of Indian property to children living in India and abroad.
• Families deciding between a Will, gift or family settlement.
• Siblings who have inherited property jointly and are planning a sale.
• NRIs inheriting ancestral or self-acquired property in India.
• Professionals advising families on cross-border inheritance planning.

Quick Answer: How Is NRI Property Sale Taxed in India?

An NRI selling inherited or gifted property in India generally faces:

Issue	Position
Capital gains rate	12.5% (subject to applicable provisions)
Indexation benefit	Not available for NRI sellers under the new framework
TDS	Deduction under Section 195 at applicable rates on sale consideration unless lower deduction certificate obtained
Lower deduction route	Application through Lower Deduction Certificate process (Form 128 under Income-tax Act, 2025 framework; corresponding to earlier Form 13)
DTAA relief	Possible where eligible under the applicable tax treaty
Repatriation	Governed separately under FEMA/RBI rules

The biggest mistake families make is assuming that resident and NRI children will have identical tax consequences merely because they inherit the same property.

They may not.

The Capital Gains Rate Asymmetry: NRIs Do Not Get the Same Choice

For property acquired before 23 July 2024, resident sellers may have a choice between:

• 20% tax with indexation, or
• 12.5% tax without indexation

whichever results in lower tax.

NRI sellers, however, do not enjoy the same flexibility.

Seller Status	Property Acquired Before 23 July 2024	Property Acquired On/After 23 July 2024
Indian Resident	Choice between 20% with indexation or 12.5% without indexation (whichever is beneficial)	12.5% without indexation
NRI	12.5% without indexation	12.5% without indexation

For older properties, especially properties held for decades where inflation-adjusted cost can substantially reduce taxable gains, indexation can be valuable.

Planning implication:

For resident heirs, the tax rate itself may provide a planning opportunity.

For NRI heirs, the focus shifts to other levers:

• correct determination of cost,
• FMV as on 1 April 2001 where applicable,
• exemption planning,
• DTAA relief,
• and proper TDS management.

The NRI TDS Trap: How Lakhs Can Get Blocked Until Refund

The biggest practical problem for NRI sellers is often not the final tax liability.

It is cash flow blockage due to TDS.

Seller	Applicable Provision	TDS Position	Practical Impact
Resident seller	Section 194-IA	1% where applicable (above threshold)	Usually manageable
NRI seller	Section 195	Applicable rate including surcharge and cess, depending on facts	Large amount may be deducted from sale proceeds

The key difference:

Resident seller TDS is generally linked to sale consideration under the specific property TDS mechanism.

NRI seller TDS under Section 195 applies based on the payment made to the non-resident seller and may require a lower deduction certificate to avoid excessive withholding.

Without a Lower Deduction Certificate, the buyer may deduct tax at the applicable rate on the gross amount payable, even though the actual capital gain may be much lower.

Worked Example: NRI’s Share of Consideration Is ₹90 Lakh

A property inherited by three siblings is sold for:

Total sale consideration: ₹2.70 crore

Each sibling receives:

1/3 share = ₹90 lakh

Assume one sibling is an NRI.

Scenario	Approximate Tax Deduction
Without Lower Deduction Certificate	Around ₹11.7 lakh to ₹13.5 lakh (depending on applicable rate)
With Lower Deduction Certificate	Based on estimated actual tax liability

The difference can result in several lakh rupees remaining blocked until the refund process is completed.

Refunds may take considerable time, affecting:

• investment plans,
• remittance plans,
• and family settlements.

Important Point for Joint Property Sales

In inherited property sales involving multiple heirs:

TDS is calculated separately for each seller based on:

• their residential status,
• amount payable to them,
• and applicable provisions.

A resident sibling selling alongside an NRI sibling does not automatically face NRI TDS treatment.

Each seller must be evaluated separately.

How to Avoid the NRI TDS Trap

An NRI seller should plan the Lower Deduction Certificate process before the sale is completed.

Documents generally required include:

• proposed sale agreement,
• computation of estimated capital gains,
• ownership and inheritance documents,
• passport and foreign address details,
• supporting tax records.

The biggest mistake is applying after the buyer has already deducted the tax.

(Continued in Part 1B: DTAA Relief, Section 54/54F Planning, CGAS Compliance, FMV as on 1 April 2001, FEMA Repatriation, Action Checklist and FAQs.)

NRI Holding Property in India: Taxation, TDS, NRE/NRO Rules & ITR Filing Guide (AY 2026–27 Onwards)

 By CA Surekha Ahuja

The Definitive Legal & Tax Architecture for Global Indians Owning Property in India

Why This Guide Matters (AY 2026–27 onwards)

For AY 2026–27 and beyond, NRI property taxation in India is no longer just about “tax rules” — it has become a structured compliance ecosystem under the Income Tax Act, 2025.

We now operate in a framework where:

• Capital gains are taxed under a recalibrated concessional regime (12.5% LTCG)
• TDS on NRI transactions operates as a cash-flow control mechanism (Section 393)
• Bank remittance is governed by document-driven FEMA clearance (Forms 145/146)
• Reporting flows are integrated into PAN-based systems (Form 141 + AIS/Form 168)
• And planning tools like Form 128 (lower TDS certificate) determine liquidity efficiency

In simple terms:

India does not just tax your property anymore — it tracks, withholds, validates, and then allows movement of your money through a compliance pipeline.

Residential Status & Tax Exposure – The Foundation Layer

An NRI is not taxed on global income in India — but India always retains taxing rights over India-situated assets.

If you own property in India:

• Rent = “Income from House Property”
• Sale = “Capital Gains”
• Inheritance → taxed only at transfer stage (not acquisition)

 Core Principle

Whether you live in Dubai or Toronto — the moment your property generates income in India, India becomes the first taxing jurisdiction in the chain.

NRE vs NRO – Where Property Money Must Flow

NRO Account (Default Route)

• Rent credited here
• Sale proceeds credited here
• Subject to Indian tax deduction (TDS)
• Remittance allowed after compliance

NRE Account (Restricted Route)

• Clean foreign income only
• Limited eligible inward transfers
• Not a default parking account for property sale proceeds

Thumb Rule

Indian property money enters through NRO and exits through compliance — not shortcuts.

Taxation of Rent & Sale – Core Computation Logic

A. Rent from Property

Taxed under “House Property”:

• Gross rent
• Less: 30% standard deduction
• Less: interest on home loan (if any)

TDS on Rent (NRI landlord)

• Typically 30% + surcharge + cess
• Deducted by tenant (resident or business payer)

Reality Check

30% TDS is not 30% tax — it is an advance blockade, not the final liability.

B. Sale of Property

Holding Period Rule:

• ≥ 24 months → Long-Term Capital Gain (LTCG)
• < 24 months → Short-Term Capital Gain (STCG)

Tax Rates (AY 2026–27 onwards):

• LTCG: 12.5% + surcharge (capped at 15%) + 4% cess
• STCG: Slab rates (often 30% + surcharge + cess)

Exemptions on Capital Gains (Renumbered Framework)

Under Income Tax Act, 2025:

Section 123 (Old 54)

Reinvestment in residential property
→ Cap: ₹10 crore

Section 124 (Old 54F)

Reinvestment of capital gains into residential house
→ Cap: ₹10 crore

Section 125 (Old 54EC)

Investment in specified bonds (NHAI/REC etc.)
→ Cap: ₹50 lakh within 6 months

Planning Insight

You don’t reduce tax by calculation alone — you reduce it by reinvestment structure.

The Real Control System – TDS on NRI Property Sale (Section 393)

This is the most critical compliance layer.

Core Rule

Buyer must deduct TDS on entire sale consideration, not just gain.

This applies even if:

• Sale value < ₹50 lakh
• Property is jointly owned
• Partial payments are made

Typical TDS Structure

LTCG Property:

• 12.5% + surcharge + cess

STCG Property:

• Up to 30% + surcharge + cess

Reality Impact

On a ₹2 crore sale, TDS may exceed ₹30–40 lakh even when actual tax liability is much lower.

Form 128 – Lower / Nil TDS Certificate (Liquidity Optimisation Tool)

This is the most underused but most powerful tool for NRIs.

Purpose:

To align TDS with actual tax liability instead of gross sale value

Requirements:

• PAN & residential status proof
• Property documents
• Cost of acquisition + improvement
• Capital gain computation
• Proposed exemptions (123/124/125)
• Buyer details

Outcome:

Tax officer issues certificate → buyer deducts reduced TDS

Strategic Insight

Form 128 is not a compliance step — it is a liquidity management instrument.

PAN-Based System (Form 141) vs TAN Route

From AY 2026–27 onwards:

Form 141 (PAN-based mechanism)

• Unified challan + statement system
• Captures property TDS under Schedule B
• Auto-generates TDS credit in AIS (Form 168)

TAN Route (Traditional system)

• Used by companies, firms, large deductors
• Quarterly returns (Form 144 equivalent structure)

Key Reform Message

India is gradually shifting property TDS from TAN-driven compliance to PAN-driven transparency.

Repatriation System – NRO → Bank Approval → Foreign Transfer

Sale proceeds cannot freely exit India.

Mandatory Chain:

1. Credit to NRO account
2. Tax computation + TDS reconciliation
3. CA certification (Form 146)
4. Remitter declaration (Form 145)
5. Bank approval under FEMA
6. Repatriation (up to USD 1 million/year)

Core Principle

You don’t transfer money out of India — you prove eligibility to take it out.

Rent From Property – Tax Reality Check

Even when TDS is 30%, final tax may be much lower:

• 30% standard deduction
• Interest deduction (if loan exists)
• Refund possible through ITR filing

 Myth vs Reality

High TDS on rent does not mean high tax — it means forced advance collection.

ITR Filing (AY 2026–27) – The Final Settlement Layer

Filing is mandatory if:

• Property is sold
• Rent is earned
• TDS is deducted
• Repatriation is made

Must-report schedules:

• House Property Income
• Capital Gains (LTCG/STCG)
• Exemptions (123/124/125)
• TDS credits (Form 141 / AIS Form 168)

Critical Insight

TDS is not taxation. ITR is the final computation authority.

DTAA – The Final Layer of Relief (Not Replacement)

DTAA does NOT eliminate Indian tax.

It only ensures:

• No double taxation
• Foreign tax credit in country of residence
• Relief via TRC + Form 10F

Sequence:

1. India taxes income
2. India issues credit
3. Foreign country grants relief

Key Structural Flow (Master Compliance Chain)

Think of it as a pipeline:

Property Income → TDS (393/Form 141) → NRO Account → Form 128 (optional optimisation) → Forms 145/146 (remittance) → ITR Filing → DTAA Credit Abroad

Critical Mistakes NRIs Make

• Assuming 1% TDS applies (wrong for NRIs)
• Not filing ITR after sale
• Using NRE for property proceeds incorrectly
• Ignoring Form 128 eligibility
• Not reconciling AIS/Form 168
• Treating DTAA as tax exemption (it is not)

FINAL KEY TAKEAWAYS

If you own property in India as an NRI:

• Taxation is inevitable
• Planning determines liquidity
• TDS is a cash-flow control system, not final tax
• NRO is default holding account
• Form 128 determines how much cash gets blocked
• Form 141 governs transparency
• ITR is the final legal closure
• DTAA is post-tax relief, not pre-tax exemption

Closing Thought

Indian property for NRIs is no longer a passive asset — it is a regulated financial corridor where tax, banking, and reporting move in sync.
Those who understand the sequence don’t just comply — they optimise.

 

 

GSTAT Filing Window Extended till 31 July 2026: Government Issues Fresh Notification under Section 112 of the CGST Act

 The Central Government has issued a fresh notification under Section 112(1) read with Section 112(3) of the CGST Act, 2017, superseding the earlier notification dated 17 September 2025, thereby extending the timeline for filing appeals and applications before the Goods and Services Tax Appellate Tribunal (GSTAT).

As per the notification, 31 July 2026 has been notified as the last date for filing appeals in cases where the order sought to be appealed was communicated before 1 May 2026. For orders communicated on or after this date, the normal limitation period of three months under Section 112(1) will apply.

Similarly, departmental applications in respect of orders passed before 1 February 2026 may also be filed up to 31 July 2026, whereas applications relating to orders passed on or after this date will be governed by the statutory limitation period of six months under Section 112(3).

This notification provides a final transitional filing window for legacy GSTAT matters, ensuring that taxpayers and the department are not prejudiced due to the delayed operationalisation of the Tribunal, and enabling a smooth shift into the regular limitation framework thereafter.

Income Tax Challan Correction: Complete Authority Guide to Fix Wrong AY, Major Head & Minor Head (AY 2026–27)

Income Tax Challan Correction is a restricted online facility provided on the Income Tax e-filing portal to rectify specific challan-level errors after payment.

It is primarily used to correct:

• Assessment Year (AY)
• Major Head
• Minor Head (100 / 300 / 400)

The facility operates within strict system controls linked to CIN generation, OLTAS mapping, and CPC processing cycles.

What Can Be Corrected

Parameter	Meaning	Time Limit	Eligibility
Assessment Year	Wrong AY selection	7 days	Allowed
Major Head	Tax classification error	30 days	Allowed
Minor Head	100 / 300 / 400 mismatch	30 days	Allowed

Minor Head Classification (Key Practical Area)

Code	Meaning	Usage
100	Advance Tax	Instalments
300	Self-Assessment Tax	Return filing payment
400	Demand Payment	CPC / Assessment demand

Most common correction issue arises between 300 and 400 misclassification.

Eligibility Logic (System-Based Flow)

Condition	Status	Outcome
Within prescribed time limit	Eligible	Online correction allowed
Challan not processed in CPC	Eligible	Proceed online
Already consumed in CPC processing	Not eligible	AO route required
Second correction request	Not allowed	AO route required
Invalid correction type	Not allowed	AO route required

Step-by-Step Process

Login to Income Tax e-filing portal (PAN-based)

Navigate to:
Services → Challan Correction

Select:
Create Challan Correction Request

Choose challan using:
CIN or Assessment Year

Select correction type:
AY / Major Head / Minor Head

Enter corrected details and validate summary

E-Verify using:
Aadhaar OTP / DSC / EVC

Track status under:
View Challan Correction Status

System Logic Behind Restrictions

System Stage	Function
CIN generation	Bank generates challan reference
OLTAS mapping	Tax credited to ledger
CPC processing	Return validation begins
Ledger locking	Data becomes final

Once ledger locking occurs, challan enters a non-editable state.

When Online Correction Does Not Work

Situation	Action Required
Time limit expired	AO intervention
Challan already consumed	Manual correction via AO
System rejection	Grievance + AO escalation
Second correction attempt	AO route only

Practical Scenarios

Scenario	Online Correction
Self-assessment tax paid under 400 instead of 300	Allowed
Advance tax misclassified	Allowed
Wrong AY selected	Allowed within 7 days
Challan already reflected in processed return	Not allowed

Compliance Impact

Incorrect challan mapping can lead to:

• AIS / Form 26AS mismatch
• Refund delays
• CPC demand adjustments
• Interest exposure under 234B / 234C

Even if tax is paid correctly, wrong mapping disrupts credit recognition in the system.

Key Takeaways

• Only AY, Major Head, and Minor Head can be corrected
• AY correction is strictly time-bound (7 days)
• Minor head errors are most frequent (300 vs 400)
• Only one correction request is permitted per challan
• Post-CPC processing requires AO intervention
• System is governed by CIN lifecycle and ledger locking

FAQs

Can self-assessment tax be corrected if wrongly paid under demand head?

Yes, if eligible, minor head correction is allowed.

How many times can challan correction be done?

Only once per challan.

What if challan is already processed in CPC?

Correction must be done through the Assessing Officer.

Can AY be corrected after payment?

Yes, but only within 7 days.

Conclusion

Income Tax Challan Correction is a controlled system-level reconciliation mechanism, not a general rectification tool.

It functions only within the active window before CPC ledger locking.

Core principle:

If CIN is active → correction possible
If CIN is consumed → only jurisdictional remedy remains