Ceasefire violation by Pakistan shakes investor confidence in Punjab
AMRITSAR: The ongoing tensions and fragile ceasefire along the India-Pakistan border in
, especially after
, have chilled Non Resident Indians (NRI) investment in Punjab, particularly in border districts like Amritsar and Gurdaspur, Pathankot and Tarn Taran .
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Fearing instability, NRIs are shelving plans for ventures like hotels and real estate, with many exploring safer options abroad.
Rattled by the uncertainty , the local industrialists are also hedging their bets, planning alternate manufacturing units and residences outside Punjab which could severely damage the Punjab's economic prospects and threatens a long term growth in the region.
Many NRIs, who once saw the state as a promising destination for business ventures, are rethinking their plans.
Take, for instance, Rajwinder Singh , an NRI from Switzerland who had been planning to invest in a boutique hotel in Amritsar's bustling heritage district. 'I was ready to move forward but with the ceasefire and the uncertainty it brings, I'm holding off ', said he His concerns echo those of others who fear that the fragile peace could unravel, reigniting tensions and disrupt business operations.
For some, the ceasefire has even prompted a reevaluation of long-term plans.
Germany based NRI Parmod Kumar informed that they are now exploring opportunities in other countries .'If conflict flares up again, it could destabilize everything', he said .
The trend is not limited to NRI's alone Harjit Singh, who makes sewing machine spare parts in Amritsar said 'I can't risk my capital when drones are flying over Punjab,' Instead, he said he will begin exploring opportunities in Dubai, where investor-friendly policies and political stability are more appealing.
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Local industrialists are also planning to diversify their assets. Some are contemplating on establishing secondary manufacturing units in safer states away from Punjab, while others are mulling over purchasing properties abroad.
Agreeing with the new trend, Rajwinder said he has been getting several queries from his relatives and friends from Punjab , He clarified 'It's not about abandoning Punjab . It's about survival. If war breaks out, our factories could be collateral damage. A second home or business abroad is insurance".
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The lawyers representing the income tax department said:The reply: 'On a pointed query, as to why the buyers' consent would be required, the counsel for the Revenue submits that the same would be necessary in order to obviate any action on the part of the buyers to recover the amount of the TDS that had been deposited. She states that although, there is no dispute as to the deposit of the TDS, but the petitioner's (NRI) case has been withheld only on account of the documents required from the buyers.' Delhi High Court final judgement The Delhi High Court ordered the income tax department to give the full TDS credit of Rs 18 lakh to this NRI and also compute the tax refund amount due to judgement: 'In the peculiar facts of this case, we consider it apposite to direct the Revenue to correct the record and reflect the TDS deposited by the buyers to the petitioner's credit under the return filed in the Form 26QB with effect from the date, the amount was deposited. The Revenue shall further compute the amount of the refund, if any, that may be due to the petitioner in accordance with law. All the orders and communication not in conformity with the aforesaid directions shall be treated as having been set aside. The petition is allowed in the aforesaid terms. The pending application is also disposed of.' To reiterate, the NRI computed the balance of income tax liability at Rs 1.9 lakh (1,91,780) for this Rs 2 crore property sale and deposited the same as advance tax. His AIS was showing this advance tax Income tax department did not dispute this aspect. What is the significance of this case for NRIs? ET Wealth Online has asked various experts about the significance of this case, here's what they said: Gopal Bohra, partner, N.A. Shah LLP, says: 'In this case, the buyer has appropriately deducted the tax at source @20% while making payment to the non-resident seller under section 195, however, wrongly deposited the TDS amount by filling Form 26QB which is applicable where tax is deducted @1% on purchase of property from resident seller. Due to this procedural error committed by the buyer, the non-resident seller's 26AS reflects TDS only @ 1% and balance TDS amount remains unconsumed under PAN of the buyer. Since, there was no loss to the revenue as the buyer has deposited the entire TDS with the government, the High Court has correctly directed the tax department to give credit of the balance TDS amount to the non-resident seller.' Rahul Jain, Partner at Khaitan & Co, says: 'For NRIs selling property in India, this ruling underscores the importance of proactive tax compliance. It is vital to inform the buyer of their non-resident status, ensure that tax is deducted and deposited timely with the government, and that TDS is reported in Form 27Q with correct details (including the TDS amount and PAN of the buyer). If feasible, NRIs may ask the buyers to share the draft form prior to filing for confirmation. NRIs should also ensure to collect Form 16A (TDS certificate), monitor Form 26AS, and file the return in India to claim credit or refund, within statutory timelines. Small lapses can lead to significant complications, so early diligence can help avoid long and costly disputes.' Jain adds: "Income tax law explicitly states that taxes deducted at source and paid to the Central Government by the payor shall be treated as the taxes paid by the recipient. Accordingly, the recipient is legally entitled to claim credit of such taxes deducted and paid. In this instance, the fact that taxes were deducted and paid in India by the buyer (on behalf of the recipient) was undisputed and the issue was strictly limited to procedural lapse on part of the buyer in filing the correct tax form. While the tax department claimed that certain documents and an indemnity bond is required from the buyer as per the internal Standard Operating Procedure to rectify the issue, the High Court exercised its powers of writ and issued the directions to grant the credit." Madhura Samant, Managing Partner, Elarra Law Offices, says: "The Court rightly held there was no statutory power for such a reversal and found the demand and penalty notices to be arbitrary and lacking in reasoned consideration. A buyer's procedural error cannot be allowed to prejudice a compliant seller. This case underscores the importance of balancing procedural compliance with a fair and fact-based evaluation of taxpayer conduct." Samant adds: 'NRIs selling property in India must ensure that the buyer deducts TDS using Form 27Q—not Form 26QB. It is also critical that the buyer has a valid TAN (Tax Deduction Account Number) before deducting TDS, as PAN alone is not sufficient in transactions involving NRIs. Without a TAN, Form 27Q cannot be filed. Additionally, the NRI seller must obtain Form 16A (the TDS Certificate) from the buyer as proof of tax deduction and deposit. Compliance should be double-checked before execution. Even a minor procedural lapse can escalate into significant tax disputes. Proactive oversight and proper documentation are essential to secure rightful tax credit and avoid unnecessary litigation. Legal safeguards start with paperwork. An incorrect form can lead to years of litigation and blocked refunds.' Deepesh Chheda, Partner, Dhruva Advisors: The Delhi High Court prioritized the substance of tax payment over procedural error. Despite the buyers incorrectly filing TDS form, the court recognized that the entire tax liability had been discharged and directed the Revenue to credit the full TDS amount to the NRI, emphasizing that a mere technical lapse should not obstruct rightful credit. This High Court ruling serves as a crucial precedent for NRIs, affirming that substantive tax payment prevails over procedural errors in TDS filings. To prevent similar issues, NRIs must proactively educate their buyers on the correct TDS compliance for non-residents, emphasizing the mandatory use of correct form, and vigilantly verify proper filing to ensure timely credit and avoid protracted dispute.
