Understanding TDS on Property Purchase: A Complete Guide

Understanding the Basics of TDS

TDS is levied on the purchase of any immovable property worth ₹50 lakh or more. The buyer is obligated to deduct 1% of the sale value as tax at source, as per the rules mentioned in Section 194IA of the Income Tax Act. For example, if you purchase a property worth ₹70 lakh, you must pay TDS of ₹70,000 to the government through the prescribed online portals.

The TDS amount must be submitted to the government within the stipulated time frame. It is important to note that this provision does not apply to the purchase of agricultural land. The TDS deduction on home purchases must be made at the time of payment to the seller, and the amount should be remitted promptly.

Since there are several considerations involved, it is essential to understand the fundamentals of TDS applicability. The slab limit of ₹50 lakh means that a property must cost at least this amount or more for TDS to be deducted.

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Property Type and Individual Contribution

The type of property is another important factor. TDS compliance for property buyers applies to immovable property, which includes residential units, commercial properties, and land holdings. However, it does not cover agricultural land located in rural areas, which can be purchased without TDS liability.

TDS rules clearly state that the liability to deduct and deposit the tax falls upon the buyer of the property.

An important update regarding TDS was introduced in 2024, concerning properties with multiple buyers or sellers. In such cases, even if the individual contribution of each buyer is below ₹50 lakh, TDS is still applicable if the total cost of the property exceeds ₹50 lakh. This means that even if you jointly purchase a property and your share is under ₹50 lakh, you are still liable to pay TDS if the total transaction value exceeds the threshold.

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What Makes the Total Cost

The term ‘total cost of property’ refers to the complete amount paid by the buyer for the purchase. TDS on property purchase in Telangana also includes additional costs such as utility charges, maintenance fees, parking charges, and club membership fees. These must be added to the total cost for accurate TDS calculation.

In cases where a buyer takes a home loan to purchase a property, the total cost refers to the entire value of the property, not just the down payment made.

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Paying the TDS

The process of paying TDS is straightforward. The following are the steps to deposit the amount with the government in accordance with TDS rules for residential property purchases.

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Step 1: Visit the government’s official income tax website: www.incometax.gov.in
Step 2: Locate and select the ‘e-Pay Tax’ option.‍

Step 3: If you are a first-time user, enter your PAN or TAN number, verify your identity through an OTP sent to your registered details, select the option ‘Pay TDS’, and choose the relevant assessment year. Then fill in the required details.
Step 4: If you are already a registered user, log in with your credentials, go to the ‘e-File’ menu, choose ‘e-Pay Tax’, then ‘New Payment’. Select the appropriate assessment year, and proceed with the ‘Pay TDS’ option.

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You can pay TDS using various methods, including net banking, debit or credit cards, UPI, or RTGS/NEFT. The portal supports all major public and private sector banks, making the process simple and convenient.

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During the payment process, Form 26QB and Form 16B must be completed.

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• Form 26QB is used for reporting and paying TDS. It must be filed by the property buyer within 30 days from the end of the month in which TDS was deducted. The form contains details about the property, PAN information for both parties, and payment information.
  
  
• Form 16B acts as proof of TDS deduction in the form of a TDS certificate. It is generated by the TRACES portal and must be completed within 15 days of filing Form 26QB. This certificate is then used by the seller to claim tax credit.
  
  

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TDS Simplified at Levonor

The payment of TDS on the sale of property is not an additional cost but an advance tax payment made by the buyer on behalf of the seller. Ensuring proper TDS compliance is vital, which is where Levonor offers assistance. Our team provides guidance and support with the relevant documentation, ensuring that both parties remain fully compliant with legal and tax regulations.