Everything You Need to Know About TDS
Jul 24, 2019 Home Trading Steps
Tax deduction at source (TDS) is a part of a property transaction in India. According to it, the person (Deductor) who is liable to make the payment to the seller (Deductee), shall deduct the tax at source and remit the same into the account of the Central government. The deductee from whose income, the tax has been deducted at the source will be entitled to the credit of the amount so deducted on the Form 26AS or TDS certificate issued by the deductor.
We discuss everything you need to know about the TDS on property purchase and renting:
TDS on property purchase
Under Section 194-IA of the IT Act, the buyer of any flat, land or commercial property shall deduct 1% TDS at the time of purchase. For example, the cost fo the property is Rs 1 crore, then the buyer will have to deduct the TDS of Rs 1 lac at the time of registration.
1. Transactions where this deduction is not applicable:
The deduction only applies to the property transaction that is higher than Rs 50 lacs. If the cost of the property is less than Rs 50 lacs then this deduction does not apply. However, for the transactions of more than Rs 50 lacs, the deductions apply to the whole amount of transaction and not just Rs 50 lacs. If you are buying the property from an NRI, then the rate of deduction is higher. The deduction does not apply to the transactions of agricultural land.
2. The process:
The entire transaction and TDS deduction needs to follow a proper channel.
a. The Form:
To credit the TDS, the buyer will have to fill out the form 26QB. In case there are multiple buyers or sellers involved, then everyone needs to fill out separate TDS form.
b. Mode of payment:
The buyer has to submit the deducted TDS to the government within 30 days. The payment can be made online and offline. Authorized banks can help the buyer to complete this process. For buyers who have taken the home loan to complete the transaction, they can ask their lender to deduct the TDS and credit it.
c. Certificate:
After the tax has been credited to the government, a certificate is issued which the buyer can download from the website. The buyer will have to issue the certificate to the seller within 15 days.
d. Penalty:
If the buyer fails to deduct the TDS, then the seller will do it. If both the buyer and the seller fail to deduct the TDS and submit it to the government then the buyer will have to pay the penalty. The cost can range anywhere between Rs 200 per day to Rs 1 lacs in total.
TDS on property purchase from NRI
If the seller is an NRI then the TDS value is different from the resident seller. The buyer will have to deduct 20 percent TDS from the seller. If the value of the property is less than Rs 50 lacs, then the buyer will have to deduct 20.80 percent of the TDS. For the properties that cost more than Rs 50 lacs but less than Rs 1 crore, a TDS of 20.80 percent shall be deducted. If the value of the property is higher than Rs 1 crore, then the deduction of 23.92 percent shall be done. However, if the seller is making short term capital gains, then the rate of deduction is 30 percent.
In case the seller is NRI, the buyer is deducting the capital gains made by the seller. The buyer has to use the Form 27Q and has to issue the seller Form 16A after crediting the payment to the government. The buyer who is purchasing the property will have to acquire a TAN number. If the buyer fails to deduct the tax, then he is liable to pay the penalty 100 percent on the outstanding amount. if the buyer fails to issue the certificate to the seller within 15 days of acquiring the TDS certificate, then the buyer will have to pay the penalty of Rs 100 per day.
We discuss everything you need to know about the TDS on property purchase and renting:
TDS on property purchase
Under Section 194-IA of the IT Act, the buyer of any flat, land or commercial property shall deduct 1% TDS at the time of purchase. For example, the cost fo the property is Rs 1 crore, then the buyer will have to deduct the TDS of Rs 1 lac at the time of registration.
1. Transactions where this deduction is not applicable:
The deduction only applies to the property transaction that is higher than Rs 50 lacs. If the cost of the property is less than Rs 50 lacs then this deduction does not apply. However, for the transactions of more than Rs 50 lacs, the deductions apply to the whole amount of transaction and not just Rs 50 lacs. If you are buying the property from an NRI, then the rate of deduction is higher. The deduction does not apply to the transactions of agricultural land.
2. The process:
The entire transaction and TDS deduction needs to follow a proper channel.
a. The Form:
To credit the TDS, the buyer will have to fill out the form 26QB. In case there are multiple buyers or sellers involved, then everyone needs to fill out separate TDS form.
b. Mode of payment:
The buyer has to submit the deducted TDS to the government within 30 days. The payment can be made online and offline. Authorized banks can help the buyer to complete this process. For buyers who have taken the home loan to complete the transaction, they can ask their lender to deduct the TDS and credit it.
c. Certificate:
After the tax has been credited to the government, a certificate is issued which the buyer can download from the website. The buyer will have to issue the certificate to the seller within 15 days.
d. Penalty:
If the buyer fails to deduct the TDS, then the seller will do it. If both the buyer and the seller fail to deduct the TDS and submit it to the government then the buyer will have to pay the penalty. The cost can range anywhere between Rs 200 per day to Rs 1 lacs in total.
TDS on property purchase from NRI
If the seller is an NRI then the TDS value is different from the resident seller. The buyer will have to deduct 20 percent TDS from the seller. If the value of the property is less than Rs 50 lacs, then the buyer will have to deduct 20.80 percent of the TDS. For the properties that cost more than Rs 50 lacs but less than Rs 1 crore, a TDS of 20.80 percent shall be deducted. If the value of the property is higher than Rs 1 crore, then the deduction of 23.92 percent shall be done. However, if the seller is making short term capital gains, then the rate of deduction is 30 percent.
In case the seller is NRI, the buyer is deducting the capital gains made by the seller. The buyer has to use the Form 27Q and has to issue the seller Form 16A after crediting the payment to the government. The buyer who is purchasing the property will have to acquire a TAN number. If the buyer fails to deduct the tax, then he is liable to pay the penalty 100 percent on the outstanding amount. if the buyer fails to issue the certificate to the seller within 15 days of acquiring the TDS certificate, then the buyer will have to pay the penalty of Rs 100 per day.
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