From 1st June 2013, whenever a buyer buys a property costing more than 50 lacs; the buyer needs to deduct a Tax at source – TDS before paying the seller. This rule was introduced in 2013-14 budget to curb underhanded property transactions in new and re-sale properties. This rule however does not apply on agricultural land transactions and transactions where the seller is an NRI.
The responsibility of deducting TDS lies with the buyer; The 1% TDS deducted needs to be deposited by the buyer with the Government. Permanent Account Number (PAN) of both the buyer and seller must be mentioned while filling form 26QB (It is an online form for furnishing details of TDS from property). In case the Seller does not have a PAN number TDS percentage will be 20%
Process and Some important points for TDS deduction
• TDS is deducted on total consideration value of the transaction; for example if the total property value is 80 lakhs ; 1 % of the total consideration value comes to 80,000. The seller is will receive only 79,20,000 for the sale. ( In case of loss in sale of property the seller can claim a refund from Income tax department)
• The amount which is deducted as TDS has to be deposited with the Government of India within a time frame of 7 days from the month end in which the TDS was done.
• The buyer can deposit the TDS deducted online through the State Bank of India or through Reserve Bank of India
• The buyer is also responsible to generate a certificate ( Form No. 16B) for the seller as acknowledgement that tax has been deducted.
• This form has to be submitted in a time bound manner of 15 days from submitting Form no. 26QB.
• In the scenario where in the TDS is not submitted on time, a penalty might be levied by the Income Tax authorities.
• If the buyer of a property is paying a builder the purchase in installments, TDS would have to be deducted on each installment as applicable.
• It is also pertinent to note here that the buyer does not necessarily need a TIN number to deduct TDS or generate TDS documents. The government has introduced measures that allow TDS transactions without a TIN number.
These process may seem obscure for a first time property buyer; It is always recommended to go through a consulting company who can hand hold the entire activity for the buyer.
