TDS on Property Purchase: The Shocking Truth You Can’t Ignore

Buying a real estate property is a big financial decision as it involves a significant investment of your hard-earned money. And you surely want to have the best property purchase experience, right? While you may do your due diligence about choosing the best property to suit your exact needs and availing a home loan from a reputed lender, you must also understand the tax implications, especially the TDS (Tax Deducted at Source) details. 

Knowing the TDS rules associated with property purchases will ensure that you comply with the tax laws and help you avoid paying unnecessary penalties and facing legal issues that could disrupt your financial planning. Knowing the rules about TDS payment on property purchases is critical for the buyer and the seller. 

So, in this guide, we discuss everything you want to know about TDS for property purchases so that you don’t get caught off guard by tax officials. 

 

What is TDS on property purchase?

TDS collects tax in India, where the taxpayer deducts the tax before making specific payments. When it comes to paying TDS on property purchases, TDS ensures that all real estate transactions are reported to the Income Tax Department, making it hard for people to evade taxes. 

 

When is TDS on property purchase applicable?

The property tax payable, i.e., TDS on property purchase, comes into play only when the transaction value is more than Rs. 50 Lakh. This threshold applies to all kinds of properties, including commercial, residential, and industrial properties. 

 

Who is responsible for deducing TDS?

The responsibility for deducting TDS lies with the property buyer, not the one selling it. So, when you are buying a property, it is your responsibility to deduct TDS before making the payment to the seller. For this purpose, the seller must provide the buyer with their PAN (Permanent Account Number) details. 

 

TDS rate on a property purchase?

Currently, as per the tax laws, the TDS on property purchases is 1% of the transaction value. This rate has remained unchanged to ensure tax compliance and maintain a simple tax structure. However, as a property buyer, you must stay updated about the latest tax rates, as any changes in the TDS regulation can alter this rate. 

Let us assume you purchased a property in Mumbai valued at Rs. 60 Lakh as per the sale agreement. Then the TDS would be 1% of Rs. 60 Lakh, i.e., Rs. 60,000. You must deduct this amount from the total payment you make to the seller and deposit the same with the Income Tax Department. 

 

How do I pay TDS on property purchases?

The TDS amount you deduct from the payment made to the real estate developer or the property seller must be deposited with the IT department within 30 days following the end of the month in which it was deducted. 

You can pay the TDS online through the IT department’s website and using Challan 26QB. Also, make sure that you have all the transaction details and seller’s information, including their PAN details, handy before you pay the TDS. 

After you deposit the TDS, you must get a TDS certificate from the IT department and provide the same to the seller in Form 16B. This certificate acts as legal proof that you have deducted the TDS on the property and deposited it. You can easily download Form 16B from the income tax portal. 

 

What are the details required for TDS deduction while buying a property?

Generally, all individuals deducting TDS must get a TAN (Tax Deduction Account) Number. However, while you are purchasing a property, you don’t need a TAN. While filling out the TDS form, you must provide certain necessary details, including the names and addresses of both the parties, i.e., you (buyer) and the individual selling the property (seller). Also, you must provide information about your contact details along with the date of the agreement, the amount paid to the seller, and the total value of the property. 

 

When is TDS on property purchase not required?

As a property buyer, you need not worry about TDS deduction on property purchase under the following circumstances:

• The stamp duty value of the property or the sale consideration is less than Rs. 50 Lakh. 
• If the property you are buying is agricultural land.
• If the individual selling the property is an NRI (non-resident Indian).

 

Impact of TDS on the seller and buyer

From a buyer’s point of view, the TDS deduction may affect your cash flow since the deducted amount must be deposited upfront. However, when you comply with the TDS rules, you ensure that you are on the right side of the law and can avoid future tax complications. 

For sellers, a TDS deduction implies that they will receive a lesser amount than the sale consideration. However, they can claim credit for the TDS amount while filing their tax returns and reduce their overall tax liability for that financial year. 

 

Conclusion

As a property buyer, you must comply with TDS rules and avoid getting into any legal issues with the income tax department. Also, you must do your due diligence when it comes to choosing the right home loan lender and apply for a loan only with reputed lenders like India Shelter that offer the loan at competitive interest rates, and you can save a lot of money in the long run.