One of the significant parts of any country’s income is the tax it collects from the citizens. Some types of taxes collected in India are income tax, property tax, sales tax, etc. Tax deducted at source is one such type of tax that a house buyer has to pay in India.
Those planning to buy a property must know about TDS on property purchase. This article will highlight all the details about TDS on purchase of immovable property.
What is TDS?
TDS or tax deducted at source is a type of tax that is required to be deposited with the government by the payer on behalf of the payee. TDS for purchase of property was introduced under the Income Tax laws with effect from June 1, 2013.
It is governed by section 194-IA of the Income Tax Act. This includes TDS on flat purchase, TDS on land purchase except agricultural land.
TDS Applicability on Purchase of Immovable Property
According to income tax, any person who makes a payment to a resident individual to buy a house property or any immovable property must pay TDS on purchase of property at the time of making payment. A person under this definition includes the following:
- Individuals
- Companies
- Firms
- HUF (Hindu Undivided Family)
- Local authorities
- Association of persons, etc.
TDS on property purchase must be deducted at the rate of 1% of the sale consideration. However, some exceptions to this rule are:
- Agricultural land
- Buying property from a recognised housing finance company or financial institution which govern under Banking Regulation Act, 1949.
- Property with value lower than ₹50 lakhs.
- Purchasing property from state or central government or related authorities.
- Transferring property from one NRI to another NRI through inheritance or gifting.
- TDS on property purchase from NRI (section 195)
Section 194-IA: TDS on House Purchase
The rules for TDS deduction are laid under section 194 – IA of the Income Tax Act. TDS on property purchase above 50 lakhs section states that TDS is applicable only on transactions above ₹50 lakhs.
Every person deducting TDS must compulsorily deposit it with the government within 30 days from the end of the month in which the amount is deducted. For instance, if the payment is made on 1st January 2024, the last day to deposit TDS will be 29th February 2024.
Budget 2022: Amendment in Rules
As per the amendments to the budget in 2022, TDS on the purchase of the property will be calculated on the amount received by the seller or the stamp duty valuation, whichever is higher. So, if a buyer pays ₹60 lakhs to the seller whereas the stamp duty valuation is ₹65 lakhs, TDS will be deducted on ₹65 lakhs even though the seller receives only ₹60 lakhs only.
How to Calculate TDS?
The rate for deducting TDS on purchase of property from builder and any other property or land is 1% of the stamp duty value or amount paid, whichever is higher. So, if the property is purchased for ₹60 lakhs, the TDS will amount to ₹60,000.
Documents Needed for Property Purchase TDS Payment
- PAN number of the buyer and seller
- Full names of both the parties in the transaction
- Category of PAN of both buyer and seller
- Full address of the property buyer and seller
- Complete and correct address of the property
- Detail of the amount paid by the buyer
- The date on which the payment is made
- Mode through which payment is made
- TDS rate and amount
- Date of agreement between the parties
Depositing TDS and Downloading Certificate
TDS must be deposited to the government within the stipulated time frame by filing the form 26 QB. The steps for the same are as follows:
- Go to the website TIN-NSDL and under the ‘services’ category select the “e-payment: pay tax online”
- Scroll down select form 26QB and click proceed
- Fill in the details asked in the form like PAN, address, etc.
- Choose the mode of payment
- Once the payment is done the taxpayer receives a challan with the challan number and form 16B certificate.
Conclusion
Thus, it can be concluded that TDS applies to properties with a value of more than 50 lakhs. Every buyer is required to deduct 1% of the amount and deposit it with the government. Failure to deduct TDS or deposit it within the time limit attracts a penalty, interest penalty, and late fee.
Those looking for TDS payment and planning to buy a luxurious property must consider properties offered by Piramal Realty. One can take an E tour to find the best property.
Disclaimer- This article is based on the information publicly available for general use as well as reference links mentioned herein. We do not claim any responsibility regarding the genuineness of the same. The information provided herein does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. We expressly disclaim /disown any liability, which may arise due to any decision taken by any person/s basis the article hereof. Readers should obtain separate advice with respect to any particular information provided herein.
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