May 20, 2024

Know find out how to withhold TDS whereas shopping for a home

Buying a home is usually a cumbersome activity. It’s a must to determine on a funds, prepare for the down cost and mortgage, choose the property, negotiate with the vendor, and in addition carry out different statutory duties.

One such activity is deducting TDS (tax deducted at supply) when paying the vendor if the property worth exceeds a sure worth. TDS is a tax mechanism by which the federal government ensures that taxes are collected upfront earlier than the cost is made. TDS is relevant on varied transactions, together with property transactions. On this first a part of the article, let’s focus on what a purchaser must do, and within the subsequent half, we’ll cowl the vendor’s duties.

Additionally learn: Shopping for your dream home? Be able to pay 5 extra taxes and fees

When is TDS relevant on property transactions?

TDS is relevant on property transactions when the transaction worth exceeds Rs 50 lakh. This is applicable to each residential and business properties. “The Finance Act, 2013, had launched part 194-IA, offering for deduction of tax at supply (TDS) in case of buy of an immovable property (aside from agricultural land) from a resident in India,” stated Vijay Bharech from Deloitte Haskin & Sells LLP.

The speed of TDS differs based mostly on whether or not the vendor is a resident of India or a non-resident. “In case of NRI sellers, the tax is required to be deducted on the price of 20 % plus relevant surcharge and cess if the property is held as a long-term capital asset (greater than 24 months), and 30 % plus surcharge and cess if the property is a short-term capital asset (lower than 24 months),” stated Yeeshu Sehgal, Head of Tax Market, AKM International, a tax and consulting agency. In case of resident sellers, the TDS price is 1 %.

Purchaser’s duties 

It’s the customer of the property who’s accountable for deducting the TDS. You will need to be aware that the TDS needs to be deducted from the cost made in the direction of the consideration of the property. The consideration worth is the quantity to be paid by the customer to the vendor to accumulate the property. “The purchaser is required to deduct TDS on the price of 1 % on every instalment if the sale consideration or stamp responsibility worth of the property is Rs 50 lakh or extra,” stated Bharech.

If the worth of the home property exceeds Rs 50 lakh, then the tax must be deducted on the whole sum, and never simply the surplus over Rs 50 lakh. For instance, if the sale worth is Rs 80 lakh, then at 1 %, the tax legal responsibility can be Rs 80,000 and never Rs 30,000.

Equally, if the sale consideration or stamp responsibility worth of the property is Rs 80 lakh and the customer is making the cost to the vendor in 5 equal instalments of Rs 16 lakh every, then TDS needs to be deducted at 1 % (Rs 16,000) on every instalment of Rs 16 lakh, defined Bharech.

If the vendor doesn’t present the everlasting account quantity (PAN) or doesn’t have one, then TDS is required to be deducted at a flat price of 20 %. In such a state of affairs, it’s advisable that the vendor receive a PAN earlier than promoting the property.

Additionally learn: Planning to purchase a home? Harvest your capital positive factors & keep away from taxes

Deposit TDS inside 30 days

As soon as deducted, the TDS quantity must be deposited with the federal government throughout the given time interval. “The client is required to deposit the tax inside 30 days from the tip of the month during which the deduction of tax is made,” stated Bharech. You will need to be certain that the TDS is deposited throughout the due date, as failure to take action might lead to penalty and curiosity fees.

Penalties of non-compliance

Non-compliance with TDS rules can lead to penalty and curiosity fees. The penalty for non-compliance with TDS rules is the same as the quantity of TDS that was not deducted or deposited. Curiosity fees are additionally relevant on the TDS quantity that was not deposited with the federal government throughout the due date. It’s, subsequently, necessary to make sure compliance with TDS rules to keep away from penalties and curiosity fees. Paying this penalty and rate of interest fees devolve upon the customer and never the vendor.

Deposit TDS on-line

To deposit TDS for a property transaction, patrons must go to the TIN Protean (previously NSDL eGov) web site and click on on the “On-line kind for furnishing TDS on property (Type 26QB)” beneath the “TDS on sale of property” part.

After that, the customer ought to choose the relevant challan as “TDS on Sale of Property,” and fill out the whole kind with all related particulars reminiscent of PAN of the vendor and purchaser, communication particulars, property particulars, quantity paid or credited, and tax deposit particulars. If the property is being offered or purchased collectively (by two or extra folks), then the small print of all must be furnished.

After submitting the shape, a affirmation display screen seems, and a novel acknowledgment quantity is generated, which patrons ought to save for future reference. Subsequent, they need to click on on “Print Type 26QB” to print the shape for his or her information, after which click on “Undergo the financial institution” to proceed additional to make the cost.

Consumers ought to proceed to the cost web page by the web banking facility of authorised banks listed on the web site. After profitable cost, a challan counterfoil might be displayed containing the CIN, cost particulars, and the financial institution identify by which the e-payment has been made. This serves as proof of cost.

Obtain TDS certificates, preserve information

“As soon as the taxes are deposited, the customer can also be required to challenge kind quantity 16B (that exhibits the TDS deducted and deposited) to the vendor inside 15 days from the due date of furnishing kind 26QB,” stated Bharech.

To obtain kind 16B, you’ll want to proceed to the TRACES portal ( after 5 days of submitting kind 26QB. To obtain kind 16B, first register and login on the TRACES portal as a taxpayer utilizing your PAN. Then choose “Type 16B (For Purchaser)” beneath the “Downloads” menu. Enter the required particulars such because the evaluation 12 months, acknowledgment quantity, PAN of the vendor, and click on on “Proceed.”

When you see the affirmation display screen, click on on “Submit Request” to proceed. After submission, you’ll obtain a hit message, and it’s best to be aware the request quantity to seek for the obtain request. Lastly, click on on “Requested Downloads” to obtain kind 16B. Upon getting the certificates, share it with the vendor.

In the course of the negotiation course of, it is strongly recommended that the customer reminds or clarifies with the vendor that he (the customer) is accountable for deducting and depositing 1 % of the property’s worth as TDS, which might be subtracted from the agreed-upon worth.