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Buying house property of Rs. 50 lakhs or more? Don’t forget to deduct TDS on payment!

Buying house property of Rs. 50 lakhs or more? Don't forget to deduct TDS on payment!

Updated on: 23 May, 2024 04:17 PM

Out of all the basic necessities of life, clothes, food, and shelter, the biggest aim of every person in today's world is to live in his own shelter. Be it small or big, we all dream of becoming a houseowner someday. And as other financial transactions are complemented by TDS rules, buying house property is also associated with TDS provisions.

Yes, if you purchase any immovable property (land, building house property) from a resident Indian for Rs. 50 lakhs or more, you are mandatorily required to deduct TDS @ 1% on every credit or payment, whichever is earlier. The TDS is to be deducted in accordance with provisions of section 194-IA.

Note:
For the purpose of this section, you are not required to obtain Tax-Deduction Account Number (TAN). Hence, if you possess PAN, you shall deduct and deposit TDS under this section on the purchase of house property of Rs.50 Lakhs or more.

Cases where these provisions don't apply
Mark a note of these points as well
Consequences in case TDS is not deducted or deposited on time
Failure to file/Late filing of Form 26QB
Tax Credit to Seller

Cases where these provisions don't apply:

In case of purchase of any rural agricultural land
Where the sale consideration of the property is less than Rs 50 Lakh
Where the purchase is made by a non-resident person.

Mark a note of these points as well:

If the seller doesn't have PAN, then TDS will have to be deducted @ 20% instead of 1%;
If the price of the property is more than Rs. 50 lakhs, TDS is to be deducted on the whole amount, not only on the amount in excess of Rs. 50 Lakhs. (For e.g., if the total price of the property is 60 lakhs, TDS to be deducted = 1% of 60 lakhs, i.e., 60,000)
If payment is made in different installments, TDS @ 1% is to be deducted on each installment. (For e.g., if the total price of the property is Rs. 60 lakhs, but it is payable in 6 installments of 10 lakhs each, TDS to be deducted = 1% of 10 lakhs, i.e., 10,000 on each payment of installment);
TDS is to be deposited to the Government within 7 days from the end of the month in which TDS is deducted;
Payment can be made online through the TIN-NSDL website;
Return is to be filed in Return-cum-challan form 26QB wherein details of both seller and buyer, details of the property, total consideration, amount of TDS deducted & deposited, amount and date of payment, etc. details are to be mentioned
Form 16-B is to be downloaded within 15 days after submitting 26QB, and it is to be provided to the seller for his records.

Consequences in case TDS is not deducted or deposited on time:

If you don't deduct TDS at the time of payment/ credit, whichever is earlier, or don't deposit TDS within 7 days from the end of the month in which TDS is deducted, then you have to pay interest on the amount of TDS.

In case of non-deduction of TDS, interest @ 1% of TDS amount is to be paid from the date on which TDS should have been deducted to the date on which TDS has been deducted;

In case of non-timely deposition of TDS, interest @ 1.5% of TDS amount is to be paid from the date of deduction of TDS to the date on which TDS has been deposited.

Failure to file/Late filing of Form 26QB:

If the buyer fails to file Form 26QB or, in the case of late filing of Form 26QB, the buyer will have to pay a fee of Rs 200 for each day till such failure continues, subject to a maximum of TDS amount.

Tax Credit to Seller

The seller will be eligible to claim a tax credit for the TDS deducted by the buyer at the time of filing of his Income Tax Return. This amount will also be reflected in 26AS of the seller as well as the buyer.

So before buying a house property, ensure that you are well versed with the relevant tax provisions. Write to us in case of any query/ feedback, and we'll ensure that you duly comply with all provisions so that you can enjoy your dream house without any worry!

No one wants to pay extra tax or face the consequences of non-compliance due to ignorance or lack of knowledge. Tax2win helps you ensure that you never fail to comply with the tax rules and don’t have to pay any penalties. Our team of highly experienced tax experts is always ready to help you with everything related to taxes. Need tax-related suggestions or advice? Get Tax Consultancy now!