TDS on property

What is TDS on the Purchase of Property? Is Applicable ?

Almost everyone has a dream to purchase at least one property in their lifetime. The experience of owning a property provides a sense of identity to many people. Now that you have shortlisted the property you want and applied for a home loan, you should also be aware of tax liabilities on such properties. Purchasing a property is a considerable investment, so you should know about TDS on property purchases to make the right decision. Consider going through this article to learn about TDS on the purchase of property before buying one.

What is TDS on the purchase of property?

According to the Income Tax Act 1961, there are few rules regarding the purchase of an immovable property. Section 194-1A of the Income Tax Act specifies that the buyer of the property is legible for deduction of TDS on the purchase of the property. Immovable properties include land or plots, apartments, commercial properties, and houses. However, a buyer purchasing agricultural land is not liable to deduct TDS. 

How is TDS deducted on the purchase of property?

Section 194-IA of the Income Tax Act specifies that TDS (tax deducted at source) is to be deducted by the buyer on the purchase of immovable property that is priced more than Rs 50 lakh. The rate at which TDS is to be deducted is 1%. TDS is to be deducted by the buyer either when the conveyance deed is being executed or at the time of paying any advance on purchase consideration before executing the deed. 

Furthermore, it is essential to pay the deducted TDS online to the central government within 30 days from the end of the month wherein TDS is deducted. 

When is TDS not deducted on the purchase of property?

TDS is not required to deducted in the following cases:

  • When the value or consideration of property is not more than Rs 50 lakh.
  • When the buyer is purchasing agricultural property.
  • When the seller is a non-resident of India (NRI). In such a case, section 195 is applied. 

Stepwise procedure TDS payment online

Following the below-given steps, you can make payment of TDS by filling the form 26qb online:

Step:1 Visit the TIN NSDL official website, i.e., https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp, so that you can access e-payment of income tax.

Step:2 Next, click on ‘Online form for furnishing TDS on property.

Step:3 Select the applicable form ‘TDS on Property’ (Form 26QB).

Step:4 Once the form is loaded, you will have to fill in the required details, such as buyer and seller details (address, phone number, PAN card, tax deposit details), details of the property, and payment information. 

Step:5 After filling out the form, confirm the submission and make sure to save the displayed number for future reference.

Step:6 You should print the form for future reference.

Step:7 Pay the TDS on the purchase of property through net banking.

Step:8 After making payment, you will see a challan. It is proof that your payment has been successfully completed. 

TDS on Purchase of Property from Non-Resident of India

If a buyer purchases the property from an NRI, then he can deduct TDS on such purchase from NRI at 20%. Additionally, if the property was sold after two years after the purchase date, then the rate at which TDS is to be deducted from the seller can increase to 30%. 

Lower Deduction of TDS on Purchase of Property

As per some provisions, the seller has the right to approach the income tax officer for a specific certificate enabling the buyer to deduct the TDS on the property at a lower or no rate. In addition to this, the seller of the property can also furnish a declaration for nil TDS. 

Conclusion 

Generally, a buyer who is responsible for deducting TDS must obtain a TAN (tax deduction account number). However, TAN is not required to deduct TDS on the purchase of the property. When buying a property, the buyer must check if the seller’s PAN is correct and legally valid. In addition to this, when filling out form 26QB, an individual should fill the details very carefully as the website doesn’t allow rectifying the errors.

By Michael Caine

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