• Shivangi Agarwal

Compliance Alert!! TDS on Purchase of Property


Who is responsible to deduct TDS on Purchase of Property?


From 1.6.2013 buyer of property is required to deduct TDS at the time of making Payment to the seller excluding GST if any


When is it required to deduct TDS on purchase of property?


TDS is required to be deducted on sale of property of more than 50 lakh of value by a Resident or of any value by a Non-Resident. TDS is to be deducted on sale of all types of properties be it Building, Flat or a vacant plot excluding agricultural land which means TDS is not required to be deducted only in case of sale of agricultural land


What is the Rate at which TDS is to be deducted?


Resident Seller - TDS @1% under section 194IA is to be deducted if the seller is a Resident and 20% in case of non-availability of PAN


Non-Resident Seller - TDS is to be deducted @ 20% plus surcharge @ 10% in case property sale price is more than 50 lakhs but less than 1 crore or 15% in case the sale price is more than 1 cr and Health & Education cess @ 4% and at the Income tax slab rate of the seller plus surcharge and health and education cess as applicable in case of LTCG mentioned above in case of Short Term capital gain (Short term capital gain arises in case of property being held for less than 2 years)


TDS Rate in case of Non-Resident Seller having Long term Capital Gain i.e. as below

Property Sale Price

Particulars

< 50 Lakhs

50 lakhs > 1 Cr

More than 1 Cr

TDS

20% of the LTCG

20% of the LTCG

20% of the LTCG

Surcharge

NIL

10% of TDS amount

15% of the TDS amount

Health and Education Cess

4% of the (TDS + Surcharge amount)

4% of the (TDS + Surcharge amount)

What is the amount on which TDS is to be deducted?


Resident Seller - TDS is to be deducted on the total Property transaction value, however no TDS is required to be deducted on the GST value, if any.


In case of home loan TDS is to be deducted when payment is to be made to the seller and not when EMI is paid to the bank


Non-Resident Seller – TDS is required to be deducted on the amount of Capital Gain as computed by Income Tax Department, for the computation of Capital Gain the seller has to file an application in Form 13 to the Income Tax Department, on failure of obtaining this certificate by the seller from the Income Tax Department TDS will be deducted by the buyer on the total sale consideration and not on the Capital Gain amount.


TDS is to be deducted whenever the payment is made for the property even in case of advance payments TDS is required to be deducted


Is acquiring TAN mandatory for deducting/depositing TDS deducted on sale of property?


Resident Seller – TAN is not mandatory for deducting/depositing TDS in case of Resident Seller


Non-Resident Seller- in case of Non-Resident Seller TAN is required to be obtained by the buyer for depositing TDS and filing return


When is the TDS required to be deposited to the government?


Resident Seller – In case of Resident Seller TDS is required to be deposited within 30 days from the end of the month in which TDS has been deducted.


Non-Resident Seller – TDS is required to be deposited within 7 days from the end of the month in which TDS has been deducted.


Which Form/Return is to be filed?


Resident Seller – Form 26QB is required to be furnished within 30days from the end of the month in which TDS has been deducted along with the payment of TDS, Form 26QB has to be filed online however the TDS payment can be made online or offline through Banks alongwith a filled copy of Form 26QB a challan. The details required for Form 26QB

  1. PAN No. of the Buyer

  2. Address of the Buyer

  3. PAN No. of the Seller

  4. Residential Status of the Seller

  5. Address of the Seller

  6. Address of the Property transferred

  7. Date of Payment

  8. Amount Paid

  9. Date of Agreement

  10. Total Transaction Value

Non-Resident Seller – After the deposit of TDS, the buyer is required to furnish a TDS Return. This TDS Return is required to be furnished in Form 27Q and is required to be furnished separately for each quarter in which the TDS has been deducted. This TDS Return is required to be deposited within 31 days from the end of the quarter in which the TDS has been deducted.


After the deposit of TDS and filing of TDS Return, the buyer is also required to furnish Form 16A to the seller of property.


What are TDS provisions in case of more than 1 Buyer or 1 Seller?


In case there is more than 1 buyer and the individual purchase price of each buyer is less than Rs. 50 Lakhs, but the aggregate value of the transaction exceeds Rs. 50 Lakhs, Section 194IA would be applicable and the TDS on Property would be required to be deducted and deposited with the govt before the due date.


Similarly, if there is more than 1 seller and the individual sale price of each seller is less than Rs. 50 Lakhs, but the aggregate value of the transaction exceeds Rs. 50 Lakhs, Section 194-IA would be applicable and TDS would be required to be deducted by the buyer at the time of making the payment to each seller.


What are the penalties for Non-Deduction/ Deposit of TDS on Property?


Interest on Late Deposit of TDS on Property – In case the TDS has not been deducted, the buyer would be required to pay 1% interest per month on the amount not deducted. In case, the TDS has been deducted but has not been paid, Interest @ 1.5% per month would be applicable in such a case.


Penalty for Late Deposit of TDS on Property – The Income Tax Officer may also levy a penalty of upto Rs. 1 Lakhs for Late Deposit of TDS on Property.


Penalty for Late Filing of Form 26QB: In case of late filing of TDS Return, a penalty of Rs. 200 per day would be levied. However, the Penalty should not exceed the amount of TDS for which this Form has not been filed.

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