TDS on Property Purchases in India: A Complete Guide

When it comes to purchasing property in India, it is crucial to understand the legal and financial aspects associated with it. One such aspect is Tax Deducted at Source (TDS), which plays a significant role in property transactions. In the case of property purchases in India, the buyer or new homeowner is responsible for paying the TDS (Tax Deducted at Source) to the government. The TDS amount is deducted from the payment made to the builder or seller at the time of purchasing the property. 

Things to Know About TDS on Property Purchase in India

Here are a few key points to remember:

Applicability of TDS on Property Transactions

TDS on the purchase of property applies to all types of immovable property, including residential, commercial, and land. Visit IIFL Home Loans for financing options, such as home loans and balance transfers at competitive interest rates for different types of properties. 

TDS Rates Charged on Purchase of Property

The current TDS rate for property transactions is 1% of the property value if it exceeds Rs. 50 lakhs. For example, if the property value is Rs. 60 lakhs, the TDS amount would be 1% of Rs. 60 lakhs, i.e. Rs. 60,000. If the property value is below the above-mentioned threshold, TDS is not mandatory. 

Your Responsibilities as a New Home Owner 

It is important to note that your responsibility as a buyer is not just limited to deducting the TDS, but also depositing it, and fulfilling the associated compliance requirements, such as filing Form 26QB and issuing the TDS certificate (Form 16B) to the seller. Failure to comply with these obligations can result in penalties and legal consequences.

TDS on Purchase of Immovable Property

Section 194IA of the Income Tax Act, 1961, is a provision that governs TDS on the purchase of immovable property. It specifically applies to transactions involving the purchase of any land other than agricultural land from one individual to another. It does not apply to transactions involving land purchased from companies, partnerships, or any other legal entities. The current TDS rate under Section 194IA is 1% of the transaction value.  

Payment of TDS on Purchase of Property

TDS payment timeline on purchase of property

As the buyer, you should deduct the applicable TDS on property purchase from the builder at the time of registration of the property or execution of the agreement, whichever occurs earlier. 

The deadline for depositing TDS is typically within seven days from the end of the month in which the deduction is made. For example, if the TDS is deducted in June, it should be deposited by the 7th of July.

After payment, Form 26QB should be filed within 30 days from the end of the month in which the TDS is deducted.

Post the submission of Form 26QB, you will have 15 days to submit Form 16B to the builder/seller of your property.

How to Pay TDS on Purchase of Property

Paying TDS on the purchase of property involves a few simple steps. Here's a step-by-step guide to help you through the process:

Step 1: Apply for a TAN (Tax Deduction and Collection Account Number) through the official website of the Income Tax Department. It is a unique 10-digit alphanumeric code. It is not required for immovable properties.

Step 2: File Form 26QB to report the TDS transaction. Provide accurate details about the buyer, seller, property, TDS amount, and other required information. PAN cards of both the buyer and the seller are required.

Step 3: You will receive a challan with a unique acknowledgement number. Use it to pay the TDS amount online through net banking or any other approved payment method.

Step 4: Once you have made the payment, the TDS certificate (Form 16B) will be available for download from the TRACES website in 5 days. 

Key Takeaways & Points to Remember

• Only property purchases above Rs. 50 Lakhs are charged 1% TDS on the price of the property. 

• It is the buyers’ responsibility to deduct and make the TDS payment. 

• Important documents and forms include - PAN cards of buyers and sellers, form 26QB, and form 16B.

• Deduct TDS on each payment in the case of instalments.

• Failure to pay TDS can lead to penalties and interests, and in more serious cases, may have legal implications.

• While it may seem a little complex, know that there is always help available at IIFL Home Loans. Read more on their website or reach out to financial advisors to clear your doubts. 

FAQs

1. What is the TDS charged if I purchase property from an NRI?

TDS will be deducted at a rate of 20% when you purchase property from an NRI. It can go up to 30% if the property is sold within just 2 years of purchase. 

2. Is the PAN card of the builder/seller mandatory?

Yes, PAN cards of both parties (buyer and seller) are mandatory.

3. How to check if I am eligible for a home loan?

At IIFL Home Loans, you can be eligible for a home loan if:

• You are an Indian national.

• If you fall in the age group of 18-75 years. 

• If you are salaried or self-employed.

4. Can I pay TDS on property purchases online?

Yes, follow these steps:

• Log in to the TIN Protean (previously NSDL) website. 

• Navigate to ‘TDS on sale of property’. 

• Locate Form 26QB. 

• Fill in the form, print form 26QB, click ‘submit to the bank’, and make the payment.

5. What is the penalty charged on delayed/non-payment of TDS on property purchases?

• The monthly interest of 1.5% on the outstanding amount 

• The penalty of up to Rs. 1 Lakh

• Rs. 200 per day of not filing 26QB post deadline