Introduction
The buyers of property are getting notices on TDS deducted @1% instead of 20% as PAN of sellers have become inoperative who has not linked PAN with Aadhar. Every buyer should know their responsibility if he or she purchases property. This article focuses on TDS deduction liability imposed on buyer by Government.
Everyone dreams to purchase property as and when he or she can afford it. Real estate sector in India has high demand and is estimated to rise by 30% this year. Budget 2024 also aims for Housing for All and government is also taking major steps for construction of House Property. Home buyers invests their hard earned money in purchasing house property for themselves but are unaware of rules and responsibilities imposed by Government on buyers. Every layman is of opinion that tax is levied on sale of property and not on purchase of property but are unware that it is responsibility of home buyers to deduct TDS at the time of purchasing property. Yes, buyers have to deduct TDS while making payment for purchase of property. Let us understand answer to each question received by clients.
Q.1 Firstly, you should know the term TDS. What is TDS?
Ans. TDS means Tax deducted at source. It means while making payments to seller you have to deduct certain amount and deposit to the credit of Central Government and make balance payment to builder. For Eg: If you are making payment of first installment of Rs.5 Lakhs then you have to deduct TDS @1% i.e. Rs. 5000 and make the balance payment of Rs. 495000/- to seller.
Q.2 What is the rate of TDS?-1% and if PAN of seller has become inoperative then 20%
Q.3 What is the threshold limit for deduction of TDS?
Ans. If sale consideration of property or stamp duty value of property is more than 50Lacs then you have to deduct TDS. Let us understand this provision through an example-
|
Sale Consideration |
SDV | Implications | |
| Case-1 | 60Lacs | 70 Lacs | Upto 31/03/2022 TDS is required to be deducted @1% on 60lacs. From 01/04/2022 TDS is required to be deducted @ 1% on 70lacs. The difference of 10lacs will be taxable in hands of buyer u/s 56(2)(vii) under head Income from Other Sources and Seller is required to calculate capital gains taking sale consideration 70lacs. |
| Case-2 | 70 Lacs | 60Lacs | TDS is required to be deducted @1% on 70lacs. |
| Case-3 | 60Lacs | 60Lacs | TDS is required to be deducted @1% on 60lacs |
| Case-4 | 45Lacs | 55Lacs | Upto 31/03/2022 TDS is not required to be deducted as sale consideration does not exceeds 50lacs. From 01/04/2022, TDS is required to be deducted on 55lacs and other tax implications will also apply. |
| Case-5 | 45Lacs | 45Lacs | TDS is not required to be deducted as sale consideration/SDV is less than 50lacs. |
Q.4 On which type of properties TDS is to be deducted?
Ans. TDS is to be deducted on all properties whether residential, commercial, industrial property or flat, building or vacant plot except agricultural land.
Q.5 How income tax department get information about purchase of property?
Ans. You cannot hide anything from Income Tax Department because department knows everything about you. When you get your property registered with sub-registrar, they are required to report to Income Tax Department about purchase of property if SDV of property exceeds Rs.30Lakhs. So if you purchase property above Rs. 30 Lakhs and get it registered then income tax knows about it and it is termed as High Value transaction.
Q.6 What is the responsibility of Home Buyers and how they can file TDS Return?
Ans. As per section 194IA of Income-tax Act, buyers are required to deduct TDS and make payment to credit of Central Govt. By filing Form 26QB. This is challan-cum-form in which you have to enter the details and file it.
Q.7 What is the time limit of filing Form 26QB?
Ans. The form is to be filed within 30 days from the end of month in which TDS is deducted. Suppose you have made payments on 27/12/2023 then you have to deduct TDS on 27/12/2023 and file form 26QB before 30/01/2024.
Q.8 What are the consequences if non-deduction of TDS and payment to Government
Ans. If buyer does not deduct TDS then he will be liable to pay interest, late fees and penalty.
|
S. No. |
Particulars | Remarks |
| 1. | Interest | 1% per month on TDS required to be deducted |
| 2. | Late Fees | Rs.200 per day from due date of filing of return but limited to amount of TDS |
| 3. | Penalty | Minimum Rs.10000/- to Maximum Rs.100000/- No penalty will be levied if TDS along with interest and late fees is paid and return is filed within one year of its due date. |
Q.9 TDS Rate in case of purchase of property from NRI?
Ans. This section is applicable to resident Indian seller. In case seller is non-resident then section 195 will apply and TDS is to be deducted @20% plus applicable surcharge and cess. In case NRI sells his property before 2 years of its purchase then TDS will be deducted @30%. The buyer is required to take TAN Number and deduct TDS of seller. NRI can apply for lower deduction of TDS and also can claim refund of excess TDS deducted by filing return of income. It can also avail exemptions to save capital gains on sale of property.
Q.10 Certain FAQ
Ans. 1. If you have purchased property of Rs.70 Lakhs, then TDS will be deducted on 70 Lakhs and not on differential amount of Rs.20Lakhs.
2. TDS is to be deducted on payment of each installments though each installments is less than 50Lakhs.
3. If value of property is Rs.70Lacs and there are two buyers than TDS will be deducted though share of each person is less than 50Lacs.
4. TDS is required to be paid on total amount excluding GST.
5. You cannot apply for lower deduction of TDS in this section.
6. TDS is required to be deducted irrespective of fact that exemption of capital gains is claimed.
7. In case of Home Loan, TDS is deducted at the time of making payment to seller and not when EMI is paid to bank.
8. This section is also applicable when buyer is non-resident.
9. TDS is required to be deducted on advance payment.
10. No Surcharge or cess is levied on TDS.
11. If seller does not provide PAN, then TDS is required to be deducted @ 20%.
12. The buyer is not required to take TAN Number.
Conclusion
The main question that strikes mind of every buyer that why this responsibility is given to them? Some also wonders and believe that it is additional tax liability levied on them. But is it true? The answer is No. Buyer is not required to bear tax burden from his pocket, instead he has to deduct certain amount from payments made to seller and deposit that amount into credit of Central Government. This arrangement is made by Govt. to trace high value transaction so that it can regulate tax evasion in Real estate sector. It is neither tax burden on seller nor on buyer. The buyer has to deduct TDS of seller and then seller can claim the TDS refund while filing return of income. The TDS deducted is shown in 26AS of seller. The main objective of Govt. is to trace transactions relating to purchase and sale of property so that it can send notices to buyer if property is not purchased out of tax paid money and to seller if capital gains is not shown in books. Accordingly buyers and sellers should always take advice of expert so that they can save themselves from notices of Tax departments.
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The above comments do not constitute professional advice. The Author can be reached at contact@financialtreecompany.com or visit our website www.financialtreecompany.com or call us on 9111872247. My name is Divya Agrawal and I am Chartered Accountant, CEO and Founder of Financial Tree Company (Your Honest Tax Assistant). We also make educational videos on Youtube and name of our channel is Financial Tree Company. Our main aim is to provide best possible solution so that our client gets satisfied with quality services.
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