Deduct TDS rules on property purchases

Purchasing a house comes with several essential tasks such as deciding on a budget, arranging for the down payment and loan, selecting the property, negotiating the price with the seller, and many more. Among these cumbersome tasks, one is deducting TDS (Tax deducted at the source) when you pay the seller and the amount exceeds a prescribed limit. 

The TDS serves as a tax collection mechanism utilized by the government to collect taxes beforehand, prior to the payment being made. Its scope extends to various transactions, such as those involving properties. In the initial segment of this article, we shall delve into the obligations of the buyer, while the following section will tackle the responsibilities of the seller.

When TDS is Applicable on Property Transactions

TDS (Tax Deducted at Source) is applicable to property transactions in certain circumstances. As per the current tax laws in India, if the sale consideration of a property exceeds Rs. 50 lakhs then TDS will be required to be deducted as per the laws. Additionally, this is applicable to both case commercial & residential properties. 

The rate of TDS (Tax Deducted at Source) for property transactions varies based on the residency status of the seller. If the seller is a non-resident Indian (NRI), the TDS rate for the buyer is 20% plus applicable surcharge and cess for long-term capital assets (held for more than 24 months), and 30% plus surcharge and cess for short-term capital assets (held for less than 24 months). On the other hand, if the seller is a resident of India, the TDS rate is 1% for the buyer.

It is important to note that TDS is applicable only on the sale consideration and not on other charges such as stamp duty, registration fee, maintenance fee, etc. 

What are the Responsibilities of the buyer?

There are certain important responsibilities of the buyer when comes to transaction of the property. One of them is deducting the TDS (tax deducted at the sources) while purchasing a property for commercial or residential purpose. 

It is worth noting that the TDS should be deducted from the consideration selling value of the property which is made by the buyer to the seller to obtain the property. The buyer needs to deduct TDS (tax deducted at the source) at the rate of 1% if the consideration value of the property exceeds the limit of Rs. 50 Lakhs or more.

If the amount of the consideration value to acquire the property exceeds Rs. 50 lakhs then the TDS must be deducted from the entire amount paid by the buyer to the seller (Not just on the extra amount of more than Rs. 50 Lakhs). For instance, if the sale price of a property is Rs. 90 lakhs then the TDS would be deducted at the rate of 1% which is Rs. 90,000. 

Similarly, if the sale consideration or stamp duty value of the property is Rs 90 lakh and the buyer paying to the seller in 5 equal installments of Rs 18 lakh each, then TDS has to be deducted at 1 percent (Rs 18,000) on each instalment of Rs 18 lakh.

In case if the seller fails to provide their Permanent Account Number (PAN) or does not possess one, a flat rate of 20% is applicable for TDS deduction. It is recommended that the seller obtains a PAN before selling the property to avoid such circumstances.

What Happens In Case of Non-Compliance?

Failing to comply with TDS regulations can lead to penalties and interest charges. If TDS is not deducted or deposited, the penalty for non-compliance is equivalent to the amount of TDS that was not deducted or deposited. 

Additionally, interest charges apply to the TDS amount that was not deposited with the government within the stipulated time frame. Thus, adhering to TDS regulations is crucial to avoid facing penalties and interest charges. Please note that the responsibility of paying these charges falls on the buyer and not the seller.

How to Deposit TDS online?

If you are looking for the steps of “how to submit TDS online” then refer to the below section. We have explained the steps to deposit TDS online stepwise.

The first step to deposit TDS for a property transaction is to visit the TIN Protean website (previously known as NSDL eGov) and navigate to the "TDS on sale of property" section. 

Then you have to select the "Online form for furnishing TDS on a property (Form 26QB)" option to start the TDS deposit process.

After that, you (the buyer) must choose the applicable challan as “TDS on Sale of Property,” & furnish all relevant details in the form such as PAN of the seller/buyer, property details, the amount paid or credited, etc. 

Note: If there are more than 2 members or jointly purchasing a property then details of everyone involved in the sale of the property (Buyer) will be required. 

Once the form has been submitted, a confirmation message will appear on the screen, & a unique acknowledgment number will be generated. Buyers are advised to save this number for future reference. 

By the completion of this step, you need to click on the "Print Form 26QB" opinion to get a printed copy of the form for your records, and then click on the "Submit to the bank" option to proceed payment process.

Then buyers have to proceed to the payment page through the Internet banking facility of authorized banks listed on the website of TIN Protean. 

After making a successful payment, a challan counterfoil will be displayed, containing details such as the CIN, payment details, and the bank name through which the e-payment has been made. This challan counterfoil serves as proof of payment for future reference.

Deposit TDS within 30 Days

After deduction, the TDS amount must be deposited with the government within the stipulated time period. As per Bharech, "The buyer must deposit the tax within 30 days from the end of the month in which the deduction of tax is made." It is crucial to ensure a timely deposit of TDS to avoid any penalties and interest charges that may be levied for non-compliance.

Download the TDS certificate & Keep all the records

After depositing the taxes, the buyer is required to issue form number 16B, which indicates the TDS deducted and deposited, to the seller within 15 days from the due date of furnishing form 26QB.

To download form 16B, buyers need to follow the below steps:

• Visit the TRACES portal (www.tdscpc.gov.in) after five days of submitting form 26QB.
• Register and log in on the TRACES portal as a taxpayer using your PAN.
• Select "Form 16B (For Buyer)" from the "Downloads" menu.
• Enter the necessary details, such as the assessment year, acknowledgment number, and PAN of the seller, and click on "Proceed."

To proceed with downloading form 16B, click on the "Submit Request" button after seeing the confirmation screen. A success message will appear after submission, and it is important to note the request number to search for the download request later. 

To download form 16B, click on "Requested Downloads". Once you have the certificate, it is necessary to share it with the seller.

During the negotiation process, it is advisable for the buyer to remind or clarify with the seller that it is their responsibility to deduct and deposit 1 percent of the property's value as TDS, which will be deducted from the agreed-upon price.

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