The buyer of an immovable property (land, flat, apartment or shop) which is valued at Rs 50,00,000/-or more is required to pay a withholding tax to the government. The prevailing withholding tax is deducted at source, and is 1% of the consideration payable to the seller. It is the responsibility of the buyer to deduct the tax from payment to seller and deposit the same in the government treasury. Where the transaction is less than Rs 50,00,000 /-, the liability to deduct tax at source will not be applicable.
For example, if the builder raise a demand of Rs 400000/-, buyer is required to deduct Rs 4000/- as TDS to the government and make a payment of 396000/- to the builder.
In case you have purchased a property from builder, it is the responsibility of the buyer to inquire about TDS deduction. A developer may or may not inform the buyer. In case of resale also, it is the responsibility of the buyer to deduct 1% of the sale value and deposit the same with government.
Rate at which TDS should be deducted
Tax is deductible at the rate of 1% of the consideration payable to a resident transferor. If a valid PAN is not provided by the seller, the tax rate would go up to 20%.
Payment and return of TDS
Tax shall be deducted at the time of payment or at the time of giving credit to the seller/builder, whichever is earlier. Payment of TDS under section 194IA is only attracted for the transactions on or after 1st June, 2013.
Down Payment: If advance payment is being made then TDS would be required to be deducted at the time of advance payment itself.
Payments in Installments / CLP Plans: If payment is made in installments, the TDS would be required to be deducted at each such installment.
TDS payment is not required for transactions before 1st June, 2013. In CLP plan, all the installments that were paid after 1st June, 2013, it is mandatory to pay the TDS.
Steps to Pay TDS
Follow this guide to pay TDS: Easy guide to pay TDS on sale of property
Time limit to deposit TDS
The tax deducted shall be paid to the credit of Central Government within a period of seven days from the end of the month of deduction. Online payment u/s 194IA is mandatory and the tax should be deposited on challan-cum-statement on Form No.26QB. Form No 16B (TDS Certificate) will be issued by the deductor within fifteen days from the due date of depositing tax.
Purchaser is not required to obtain a TAN for deduction.
More than one Buyer or Seller
In case there is more than 1 buyer and the individual purchase price of each buyer is less than Rs. 50 Lakhs, but the aggregate value of the transaction exceeds Rs. 50 Lakhs, Section 194IA would be applicable and the TDS on Property would be required to be deducted and deposited with the govt before the due date.
Similarly, if there is more than 1 seller and the individual sale price of each seller is less than Rs. 50 Lakhs, but the aggregate value of the transaction exceeds Rs. 50 Lakhs, Section 194-IA would be applicable and TDS would be required to be deducted by the buyer at the time of making the payment to the seller.
Few important points to remember
- TDS is applicable even when you are purchasing the apartment directly from the seller in resale and not from the developer.
- TDS on sale of property is required to be deducted on the total amount in case the value of the property sold is more than Rs. 50 Lakhs. This can be explained with the help of an example. If the property sold is worth Rs. 70 Lakhs, the TDS would be deducted on Rs. 70 Lakhs and not on Rs. 20 Lakhs (i.e. 70 Lakhs – 50 Lakhs). TDS on property in this case @1% would be Rs 70,000
- In case of more than 1 buyer/ 1 seller, Form 26Q has to be filled in separately for each buyer-seller combination. Eg: In case of 1 buyer and 2 sellers – 2 forms have to be submitted, and in case of 2 buyers and 2 sellers – 4 forms have to be submitted for their respective property share.
- The PAN Card of the Seller as well as the Buyer should be mandatory furnished in the Form 26QB for furnishing information regarding the tds on property and the sale transaction.
- NRIs are not required to pay TDS.
Provisions for Non Resident Indian (NRI)
If payment is made to a Non-Resident then section 194-IA will not be applicable. Rather section 195 will be attracted and TDS is required to be deducted @ 20%+EC & SHEC on the sale consideration. Surcharge @ 10% will be applicable if amount paid exceeds Rs 1 crore. The limit of Rs 50,00,000/- is not applicable in case of payments made to NRI’s.
In case of failure to comply with the provisions, interest and penalty would be imposed to the purchaser. Interest will be charged @ 1% p.m or part of the month for failure to deduct tax or short deduction of tax from the date the tax was deductible till the date the same is deducted. Interest will be charged @ 1.5% p.m or part of the month for tax deducted but not paid to the government from the date of deduction till the date of actual payment.