Easy TDS on Purchase of Property

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TDS on Purchase of Property

TDS on Purchase of Property Taxes play a crucial role in shaping a country’s economy, funding essential infrastructure and public services. Various types of taxes, including those on income and purchases, contribute to this effort. Among them, Tax Deducted at Source (TDS) is particularly significant, ensuring smooth tax collection by deducting a portion at the source.

TDS applies to diverse transactions, including the acquisition of immovable property. Understanding TDS implications for property purchases is essential for prospective buyers. This guide provides comprehensive insights into TDS, focusing on its impact on property acquisitions.

In subsequent sections, we’ll explore TDS specifics for property purchases, covering applicable rates, buyer and seller obligations, exemptions, and procedural requirements. Armed with this knowledge, individuals can make informed decisions and ensure compliance with tax regulations when navigating the real estate market.

Stay tuned as we delve into the complexities of TDS on property purchases, empowering you with the information needed for successful property transactions.

What is TDS?

TDS on Purchase of Property TDS, or Tax Deducted at Source, is a mechanism for collecting income tax directly from the source of income. This means that the person who makes the payment deducts a certain percentage of the amount payable and remits it to the government on behalf of the recipient. The recipient can then claim credit for the tax deducted at source from their total income tax liability.

TDS is regulated by the provisions of the Income Tax Act of 1961, along with the Income Tax Rules of 1962. TDS on Purchase of Property Sections 190 to 206C of the Act encompass a wide array of TDS-related provisions, addressing aspects such as rates, thresholds, responsibilities, certificates, returns, and additional regulations. Rules 30 to 37 of the Rules specify procedures, forms, time limits, and other compliance requirements related to TDS.

TDS is applicable to various types of payments, including salaries, interest, dividends, rent, commission, and fees. By deducting tax at the source, the government ensures a steady collection of revenue and promotes tax compliance among taxpayers.

TDS Rates on Purchase of Property

TDS is levied on the purchase of immovable property in India. It becomes applicable when the sale consideration or the stamp duty value of the property is Rs 50,00,000 or more. In such cases, the property buyer is required to deduct 1% of the sale consideration as TDS and deposit this amount with the government within 30 days from the end of the month in which the deduction is made.

There are certain exemptions from TDS payment for property purchases, as per the rules:

No deduction under section 194-IA is required if the consideration or stamp duty value for the transfer of immovable property is below Rs 50,00,000.
TDS is not applicable when transferring any immovable property from one Non-Resident Indian (NRI) to another NRI via inheritance or gift.
TDS is exempt if the residential house is purchased from the state or central government or any authority constituted by them.
TDS exemption applies when buying a property from a recognized financial institution or housing finance company.
No TDS deduction is required when purchasing a residential house from an Indian resident relative if the consideration is below Rs 50,00,000 and stamp charges are less than Rs 50,000.
TDS is not applicable to the transfer of agricultural land.

TDS on property purchases, follow these steps:

Visit the TIN-NSDL website and select ‘e-payment: Pay tax online’ under the ‘Services’ category.
Scroll down to the option labelled ‘TDS on Property (Form 26QB)’ and then click on ‘Proceed.’
Fill out the form with the required details, including property details, PAN details, tax deposit details, address details, and contact details.
Choose your preferred payment mode and then click ‘Proceed’ to submit the TDS amount.
Once the TDS payment is successfully processed, you will receive a challan containing a Challan Identification Number (CIN) along with a Form 16B certificate. You should provide this certificate to the seller as evidence of TDS deduction.

The consequences of delaying or defaulting on TDS payment for property purchases are as follows:

Interest penalty: If the buyer fails to pay the TDS within the stipulated due date, they will incur interest at the rate of 1% per month or part of a month from the deduction date until the date of payment. TDS on Purchase of Property For instance, if TDS was deducted on 15th January 2023 and paid on 10th March 2023, the buyer would be liable to pay interest for two months (January and February) at 1% each, amounting to Rs 1,000 for every Rs 1,00,000 of TDS.
Late fee: In addition to the interest, the purchaser will also be subjected to a daily late fee of Rs 200 for each day of delay in submitting Form 26QB. However, the maximum late fee cannot exceed the amount of TDS. For example, if a buyer delays filing Form 26QB by ten days for a TDS amount of Rs 50,000, they will incur a late fee of Rs 2,000 (Rs 200 x 10 days), which is less than the TDS amount.
Penalty: The income tax department may impose a penalty ranging from Rs 10,000 to Rs 1,00,000 on the buyer for non-payment or delayed payment of TDS under Section 271H of the Income Tax Act. However, this penalty can be avoided if the buyer pays the TDS, interest, and late fee within one year from the due date of filing Form 26QB.

Documents required for TDS filing typically include the following information:

PAN number of both the buyer and the seller
Category of PAN of the buyer and the seller
Full names of the buyer and the seller
Complete address of the buyer and the seller
Complete and correct address of the property purchased
Details of the amount paid or credited
Date of agreement or booking
Date of payment or credit
Mode of payment
TDS rate and amount

Register and download the TDS certificate (Form 16B) after paying TDS for property purchase, follow these steps:

Register on TRACES (TDS Reconciliation Analysis and Correction Enabling System) as a taxpayer using your PAN and other details.
After logging in, navigate to the “Downloads” tab and select “Form 16B (For Buyer)” from the drop-down menu.
Enter the transaction details, including the assessment year, acknowledgement number, and PAN of the seller. Then click on “Proceed”.
Check the status of your request. If it shows “Available,” you can click on the download link to obtain the Form 16B in PDF format. TDS on Purchase of Property If it shows “Submitted,” you’ll need to wait until it’s processed. You can also check the status later by selecting the “Requested Downloads” option under the “Downloads” tab.
Once you’ve downloaded the Form 16B, open it using your date of birth in DDMMYYYY format as the password.
For your documentation, you have the option to either print or save the Form 16B.

TDS on Purchase of Immovable Property

When purchasing immovable property, the buyer is required to deduct tax at source at the rate of 1% of the transaction amount or the stamp duty value of the property, whichever is higher, under Section 194-IA of the Income Tax Act.

TDS on Sale of Immovable Property

As per the Finance Bill of 2013, TDS is applicable on the sale of immovable property when the sale consideration of the property equals or exceeds Rs. 50,00,000 (Rupees Fifty Lakhs). The buyer of the property is responsible for deducting tax at a rate of 1% on the sum paid/credited or the stamp duty value of such property, whichever is higher.

Interest on Late Payment Towards TDS on Immovable Property

If the buyer fails to deposit the TDS on the sale of immovable property within the specified time, then the buyer is liable to pay interest on the late payment of TDS. The interest rate for late payment of TDS is 1.5% per month or part thereof, calculated from the date when TDS is deducted or collected to the date when it’s paid. Interest is calculated monthly, and if the payment is delayed by just one day, the interest is calculated for the entire month.

Conclusion:-

TDS on Purchase of Property In conclusion, TDS on Property Purchase is an essential tax obligation that buyers must adhere to during property transactions. It mandates deducting 1% of the property value as TDS and depositing it with the government. Calculating this TDS amount can be done manually or through a property TDS calculator, the latter being a quicker and more accurate method.

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