When you buy a property in India, TDS becomes a mandatory compliance if the property value exceeds a certain limit.
Table Of Contents
Introduction
In recent years, the Indian government has tightened tax compliance norms to ensure transparency in high-value transactions. One of the significant measures includes Tax Deducted at Source (TDS) on the purchase of immovable property. Whether you’re a buyer or a seller, understanding the nuances of TDS on purchase of property is essential to avoid legal hassles and ensure smooth transactions. This blog will guide you through the rules, rates, compliance requirements, and much more regarding TDS on property deals in India.
TDS on purchase of property refers to the tax the buyer is required to deduct and deposit with the government when making a property transaction.
It applies to transactions involving the sale of immovable property (excluding agricultural land) worth more than Rs. 50 lakhs.
The buyer must deduct 1% of the total sale consideration as TDS.
The deducted amount must be deposited with the Income Tax Department using Form 26QB.
The buyer must also issue a TDS certificate (Form 16B) to the seller.
This provision is outlined under Section 194-IA of the Income Tax Act, 1961.
Applicability of TDS on Property Transactions
Understanding when TDS is applicable helps ensure you don’t miss critical compliance points during a transaction.
TDS is applicable on the purchase of immovable property (buildings or part of buildings or land other than agricultural land) exceeding Rs. 50 lakhs.
It is applicable to both residential and commercial property transactions.
If the property is jointly owned, and the individual share of consideration for each co-owner is below Rs. 50 lakhs but the total exceeds Rs. 50 lakhs, TDS still applies.
TDS is applicable even if the transaction is done through instalments.
TDS is not applicable to gifts, inherited properties, or transfer of agricultural land.
Both resident and non-resident sellers are subject to TDS, though the rate and process differ slightly for NRIs.
TDS Rate on Purchase of Property
The TDS rate is relatively straightforward, but several nuances can affect the final deduction.
For transactions involving resident sellers, the TDS rate is 1% of the total sale consideration.
In case of non-resident sellers (NRIs), the rate is higher, usually 20% plus applicable surcharge and cess.
No TDS is required if the total sale consideration is less than Rs. 50 lakhs.
TDS must be calculated on the total sale value, not just the amount exceeding Rs. 50 lakhs.
If the seller does not provide a PAN, TDS must be deducted at 20%.
Always verify the seller’s PAN and residency status before proceeding with the TDS deduction.
Consequences of Non-Compliance
Interest will be charged for late deduction or late deposit of TDS.
A penalty of Rs. 200 per day may be levied for failure to file Form 26QB.
Additional penalties under Section 271H may apply for incorrect or late filing.
The buyer may be deemed an assessee-in-default and held liable for the TDS amount.
The seller may not receive credit for TDS in their Form 26AS, affecting their tax returns.
Legal notices and scrutiny from the Income Tax Department may follow.
Form 26QB: Filing Process Explained
Visit the TIN-NSDL website and select Form 26QB for TDS on purchase of property.
Enter details like PAN, property value, date of agreement, and payment mode.
Choose whether the property is jointly held or single-owner.
Verify all details before submission to avoid future corrections.
Submit the form and make the payment online.
Save the acknowledgment number and use it to download Form 16B later.
Issuing TDS Certificate: Form 16B
Issuing Form 16B ensures the seller can claim TDS credit during tax filing.
After filing Form 26QB, wait 5-10 days for the details to be processed.
Log in to the TRACES portal (https://www.tdscpc.gov.in) to download Form 16B.
Register yourself as a taxpayer to access the certificate.
Download Form 16B using the acknowledgment number from Form 26QB.
Provide a signed copy of Form 16B to the seller.
Form 16B serves as proof of TDS deducted and deposited with the government.
Conclusion
TDS on purchase of property is not just a bureaucratic formality; it is a legal obligation that carries financial and legal consequences if ignored. Understanding the rules, rates, and compliance procedures helps both buyers and sellers conduct property transactions with confidence.
