TDS on Purchase of Property

Taxes are crucial for a nation’s economic health, funding vital infrastructure improvements. These taxes can include income tax and sales tax. One important type of tax collection is Tax Deducted at Source (TDS), which ensures smoother tax collection across various transactions, including property purchases. If you’re buying property, understanding the TDS implications is an essential part. Let’s break it down and see simply how TDS works on the purchase of property-

What is TDS?

Tax Deducted at Source (TDS) is a way of collecting income tax. Instead of the recipient paying all their tax at the end of the year, the person making the payment deducts a portion of the income (a percentage) and pays it directly to the government. This deducted amount is then credited towards the recipient’s overall income tax liability.

What are the factors that affect the payment of TDS for the purchase of property in India?

The amount of TDS (Tax Deducted at Source) to be paid when purchasing a property in India depends on a few factors:

1. Property Value:

If the property value is ₹ 50 lakhs or more: TDS is applicable.

If the property value is less than ₹ 50 lakhs: No TDS is required.

2. TDS Rate:

If PAN of the seller is available: 1%

If PAN of the seller is not available: 20%

3. Type of Property:

TDS applies to all immovable property types, such as land and buildings.

Exception: No TDS is required for purchasing rural agricultural land.

How to deposit the TDS amount on the purchase of property?

The buyer can deposit the TDS amount on the purchase of a property in India through Form 26QB on the online tax collection portal. The official website for this is- https://www.incometax.gov.in/iec/foportal/ After the buyer deposits the TDS amount, he/she can download the Form 16 B (TDS Certificate) from the website. This certificate helps in tax reduction. Form 16B is a TDS certificate that you need to provide to the seller also. The seller can claim a TDS refund while filing their Income Tax Return. You can download Form 16B from the TRACES website (https://www.tdscpc.gov.in/) after a few days of making the TDS payment.

What are the important points to consider when making a TDS payment?

Due Date: The buyer must deposit the TDS within 30 days from the end of the month in which the deduction was made. Also, the penalty for late TDS payment is 1% interest per month (or portion of a month). This interest is calculated from the day you deducted the TDS until the day you actually make the payment.

Form 26QB: This form is crucial for depositing TDS on property purchases.

Form 16B: This certificate is essential for the seller to claim credit for the TDS deducted.

Accuracy: For accuracy, ensure all the information provided in Form 26QB is accurate to avoid any issues with TDS processing.

Check Latest Guidelines: This information may change according to the policies. So, it is advised the check the latest guidelines before making the TDS payment. Also Read

Tax Benefit on Home Loan

Tax Benefit on Top Up Loan

Loan Against Property Without Income Proof & Income Tax Return

Loan Against Property: How can you avail Tax benefits from LAP?

Section 24 of Income Tax Act: Check Deduction for Home Owners