Discover the easy steps to accurately calculate TDS on a property purchase to avoid tax penalties and stay compliant with regulations.
Tax Deducted at Source (TDS) is a tax collected by the government of India on behalf of the taxpayers. It is a way to ensure a regular flow of revenue for the government. If you are planning to purchase a property, then you need to know how to calculate TDS on the transaction. In this blog, we will guide you through the process of calculating TDS on a property purchase.
What is TDS on Property Purchase?
TDS, or Tax Deducted at Source, on property purchase is a tax that is applicable in India. The government requires buyers to deduct a certain percentage of the property’s sale price and pay it to the government as TDS. This tax is a way for the government to ensure that taxes are paid on time, and it helps prevent tax evasion.
The rate of TDS on property purchase is currently 1% of the property’s sale price. However, if the property was purchased from a non-resident or foreign entity, the TDS rate is 20%. The buyer is responsible for deducting the TDS amount and depositing it with the government.
To calculate the TDS amount, the buyer needs to know the property’s sale price, as well as the applicable TDS rate. The TDS amount is then deducted from the seller’s payment, and the buyer must provide the seller with a TDS certificate.
Failing to deduct or pay TDS on property purchase can result in penalties and legal consequences, so it’s essential to stay informed and comply with the regulations.
Step by Step Guide to Calculate TDS on Property Purchase:
Step 1: Determine the Property Value
The first step is to determine the value of the property. This is the amount that is agreed upon by the buyer and the seller. This value should be used to calculate the TDS.
Step 2: Calculate the TDS Amount
The TDS on property purchase is calculated at the rate of 1% of the property value. For example, if the property value is ₹ 70 lakhs, then the TDS amount will be ₹ 70,000 (1% of ₹ 70 lakhs).
Step 3: Check the PAN Details
Before making the payment to the seller, you need to check their PAN details. It is mandatory to deduct TDS on property purchase only if the seller has a PAN. If the seller does not have a PAN, then TDS is deducted at the rate of 20%.
Step 4: Deposit the TDS
The TDS amount deducted needs to be deposited with the government within 30 days from the end of the month in which the TDS was deducted. You can deposit the TDS amount online through the government’s website.
Step 5: Obtain TDS Certificate
Once the TDS is deposited, you need to obtain a TDS certificate from the government. This certificate will serve as proof that the TDS has been deposited. You can download this certificate from the government’s website.
Using a Property TDS Calculator:
Calculating TDS on property purchase can be a tedious task, especially if you are not familiar with the process. To simplify the process, you can use a property TDS calculator. A property TDS calculator is an online tool that helps you calculate the TDS on a property purchase based on the property value and the seller’s PAN details.
Using a property TDS calculator is simple. All you need to do is enter the property value and the seller’s PAN details, and the calculator will provide you with the TDS amount that needs to be deducted. This will save you time and effort in manually calculating the TDS.
Benefits of Using a Property TDS Calculator:
Using a property TDS calculator has several benefits. Some of these benefits include:
- Time-saving: Calculating TDS on property purchase manually can be a time-consuming task. Using a property TDS calculator can save you time and effort.
- Accuracy: Manually calculating TDS can lead to errors. Using a property TDS calculator ensures accuracy in the calculation.
- Easy to use: Property TDS calculators are user-friendly and can be used by anyone, even those who are not familiar with the process.
Applicability of TDS on Purchase of Property
TDS or Tax Deducted at Source is a tax collection mechanism in India where the payer deducts a certain percentage of tax before making payment to the payee. In the case of the purchase of property, TDS is required to be deducted by the buyer when paying the amount to the seller. The applicability of TDS on the purchase of property from a non-resident is covered under Section 195 of the Income Tax Act
Who Deducts TDS from a Real Estate Sale?
The buyer of the property is responsible for deducting TDS on the sale of property in India.
TDS Rates on Purchase of Property
The buyer must deduct tax at 1% from the sale consideration, depending upon the Date of Payment/Credit to the Seller. The buyer must also collect the Permanent Account Number (PAN) of the Seller and verify the same with the Original PAN card.
Exemptions From TDS on Purchase of Property
No deduction shall be made if the consideration for the transfer of an immovable property and the stamp duty value of such property, both, is less than fifty lakh rupees. The buyers of the property are exempt from TDS if the purchase of the property is for agricultural purposes.
Consequences of Non-Payment or Delayed Payment of TDS on Purchase of Property
If the purchaser fails to deduct tax, they will be obligated to pay interest at a rate of 1% per month. If, after deduction, the purchaser fails to deposit the tax, the interest rate increases to 1.5% per month. Furthermore, a daily fee of Rs. 200 will be imposed under Section 234E for delays or failures in submitting Form 26QB.
Moreover, at the discretion of the Assessing Officer or Commissioner, penalties may be imposed. Under Section 271C, a penalty equal to the amount of tax can be levied for failure to deduct tax, and under Section 271H, a penalty ranging from ten thousand to one lakh can be imposed for failure to furnish TDS returns.
Additionally, in cases of default, the revenue authorities may choose to initiate prosecution proceedings against the defaulter. This could result in rigorous imprisonment for a period of three months to seven years, along with a fine.
TAN Number, TDS Payment, and Returns from NRIs
| Nature of Capital Gains | Description | TDS Rate on Sale of Property by NRI |
| Long Term Capital Gains | Property held for more than 2 years | 20% |
| Short Term Capital Gains | Property held for less than 2 years | Income Tax Slab Rates of Seller |
TDS on Purchase of Immovable Property
When purchasing immovable property, the buyer is required to deduct tax at source at the rate of 1% of the transaction amount or the stamp duty value of the property, whichever is higher, under Section 194-IA of the Income Tax Act.
TDS on Sale of Immovable Property
As per the Finance Bill of 2013, TDS is applicable on the sale of immovable property wherein the sale consideration of the property exceeds or is equal to Rs. 50,00,000 (Rupees Fifty Lakhs). The buyer of the property is responsible for deducting tax at 1% on the sum paid/credited or the stamp duty value of such property, whichever is higher.
TDS on Immovable Property for NRIs
| Tax | Property Sale Price (Rs.) | ||
| Less than 50 Lakhs | 50 Lakhs to 1 Crore | Above 1 Crore | |
| Long Term Capital Gains Tax | 20% | 20% | 20% |
| Surcharge | Nil | 10% of above | 15% of above |
| Health & Ed. Cess | 4% | 4% | 4% |
|
TDS Rate (incl. Surcharge & Cess) |
20.8% | 22.88% | 23.92% |
Interest on Late Payment Towards TDS on Immovable Property
If the buyer fails to deposit the TDS on the sale of immovable property within the specified time, then the buyer is liable to pay interest on the late payment of TDS. The interest rate for late payment of TDS is 1.5% per month or part thereof, for the period from the date on which TDS is deducted/collected to the date on which such TDS/TCS is paid. The interest is calculated monthly, and if the payment is delayed by even one day, the interest is calculated for the entire month.
Documents Required for Immovable Property TDS Payment
The following are the documents required for making TDS payment on immovable property:
- PAN number of both the transferee (buyer) and transferor (seller)
- Category of PAN of both the transferee (buyer) and transferor (seller)
- Complete address of the property being transferred
- Date of agreement/booking of the property
- Total value of consideration
- Amount of TDS to be paid
- Payment details like mode of payment, bank name, and branch name
- Challan identification number (CIN) or the BSR code of the bank branch where the TDS is deposited
- Acknowledgment number of Form 26QB
- Date of deposit of TDS
In addition to these documents, the buyer must also furnish the information regarding the immovable property transaction online on the TIN website. The buyer must also collect the PAN of the seller and verify the same with the original PAN card
Things to Remember Regarding TDS
- Value Threshold: Currently, the TDS threshold for property acquisitions is set at Rs. 50 lakh. If the property’s worth exceeds this amount, the purchaser is obligated to deduct TDS at a rate of 1% of the total consideration.
- Applicability: TDS on property purchases applies to both residential and commercial properties. It encompasses all types of immovable property transactions, including flats, apartments, houses, land and commercial buildings.
- Buyer’s Duty: The responsibility for deducting TDS at the prescribed rate falls on the property buyer. The deducted sum must be remitted to the government as advance tax on behalf of the seller.
- TAN Requirement: If not already acquired, the purchaser must obtain a Tax Deduction and Collection Account Number (TAN). TAN is obligatory for TDS deduction in property acquisitions.
- Form 26QB: To adhere to TDS regulations, the purchaser must complete and submit Form 26QB online through the NSDL website or Tax Information Network Facilitation Centers (TIN-FCs). This form demands information about the property, seller, buyer, and TDS payment.
- TDS Payment: Following the completion of Form 26QB, the purchaser is required to make the TDS payment via online methods like net banking or credit/debit cards. The deducted TDS amount must be remitted to the government within the stipulated due dates.
- TDS Certificate: After successfully making the TDS payment, the buyer must download the TDS certificate in Form 16B from the TRACES website. This certificate acts as evidence of TDS deduction and should be issued to the seller.
- Home Loan and TDS: In cases where a home loan finances the property purchase, TDS is deducted on the entire consideration amount, which includes the loan component. The TDS deduction applies to the total consideration, not just the cash component.
- Exemptions: TDS on property purchases is not obligatory if the property value is below Rs. 50 lakh or if the property is being acquired for agricultural purposes.
Conclusion:
To conclude, TDS on Property Purchase is a mandatory tax that needs to be deducted at the time of making a payment to the seller. The buyer is required to deduct TDS at the rate of 1% of the property value and deposit it with the government. This TDS amount can be calculated manually or by using a property TDS calculator. Using a property TDS calculator is a time-saving and accurate way to calculate the TDS amount. By following the steps mentioned in this blog and with the assistance of Vakilsearch’s experts, you can easily calculate the TDS on a property purchase and ensure compliance with the government’s regulations.
FAQs
How is TDS calculated for property purchase?
TDS on property purchase is calculated on the property's sale value. The buyer deducts a certain percentage (usually 1%) from the total payment and remits it to the government. The formula is: TDS = Property Sale Value * TDS Rate.
How do I calculate my TDS?
To calculate TDS, multiply the applicable TDS rate by the income or transaction amount. For example, if the TDS rate is 10% and the transaction is 5 lakhs, the TDS would be 5 lakhs * 10% = 50,000.
Who will pay 1% TDS on sale of property?
The buyer is responsible for paying 1% TDS on the sale of property. This amount is deducted from the total consideration and remitted to the government on behalf of the seller.
What is TDS for 10 lakhs?
TDS for 10 lakhs depends on the applicable rate. For example, if the TDS rate is 10%, the calculated TDS would be 10 lakhs * 10% = 1 lakh.
Is TDS paid by buyer or seller?
TDS is paid by the buyer in most cases. The buyer deducts the TDS amount from the payment made to the seller and deposits it with the government.
Is TDS refundable?
Yes, TDS is refundable under certain circumstances. Excess TDS can be claimed as a refund by the taxpayer while filing their income tax return.
How is TDS calculated with an example?
TDS is calculated by multiplying the transaction amount by the TDS rate. For instance, if the transaction is 8 lakhs and the TDS rate is 5%, the calculated TDS would be 8 lakhs * 5% = 40,000.
What is TDS rate chart?
The TDS rate chart is a schedule that outlines the applicable TDS rates for various types of transactions. It varies based on the nature of income, providing a comprehensive guide for deduction percentages.
How much income is TDS free?
The income threshold for TDS exemption varies based on the type of income. For salaries, TDS is not deducted if the income is below the basic exemption limit. However, for other incomes, specific thresholds apply.
How can I avoid TDS on sale of property?
To avoid TDS on the sale of property, the seller can obtain a certificate under Section 197 from the Income Tax Department, specifying that no TDS should be deducted on the transaction.
How can I reduce TDS on sale of property?
TDS on property sale can be reduced by availing benefits under applicable sections, such as Section 54 or 54F, which provide exemptions for capital gains if the proceeds are reinvested.
What are the TDS rules for property?
TDS rules for property mandate the buyer to deduct 1% TDS on the sale value and remit it to the government. However, exemptions and provisions exist, and adherence to these rules is crucial.
What is the TDS limit for property sale?
The TDS limit for property sale is generally 1% of the sale value. However, the applicability and rates may vary based on the nature of the transaction and the prevailing tax laws.
How do I claim my TDS refund?
To claim a TDS refund, taxpayers need to file their income tax return. Excess TDS deducted is reconciled, and the taxpayer can claim a refund of the amount overpaid.
Is TDS mentioned in the sale deed?
While TDS details may not be explicitly mentioned in the sale deed, it is a crucial aspect of the property transaction process and must be considered by both the buyer and the seller.
Is TDS refundable on property sale?
Yes, TDS is refundable on property sale if the seller's actual tax liability is lower than the TDS deducted. The excess TDS can be claimed as a refund while filing the income tax return.
In which case TDS is not applicable?
TDS may not be applicable in certain cases, such as when the transaction amount is below the prescribed threshold or if the seller has obtained a certificate for non-deduction under Section 197.
How can TDS be removed?
TDS can be avoided or reduced by following legal provisions, obtaining certificates for non-deduction, and utilising exemptions available under the Income Tax Act, thereby ensuring compliance with relevant regulations.
What is the best way to reduce TDS?
The best way to reduce TDS is to leverage exemptions and deductions provided by tax laws. Investing in eligible instruments or properties and obtaining certificates for lower TDS rates can effectively minimise the deduction.
Who is liable to deduct TDS?
The person responsible for making specified payments is liable to deduct TDS. This includes individuals, companies, or any entity making payments like salaries, interest, rent, etc., as per the provisions laid out in the Income Tax Act.
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