Understanding TDS on Property Purchase: A Complete Guide

Property purchase is one of the greatest achievements in a person's life. For most individuals, it is a one-time experience because they invest their total savings in their dream home. As such, being a careful and compliant buyer is crucial. This means understanding the financial and legal implications that accompany property purchase. One of the tax implications of buying property is TDS or Tax Deducted at Source on purchases of property, as laid down by the Indian Income Tax Act.

Understanding The Basics of TDS

TDS is levied on the purchase of any immovable property that is worth rupees 50 lakhs or more. The buyer has an obligation towards a 1% tax deduction at source of the sale value of the property, as per the rules laid down in section 194IA of the ITA. For instance, if you purchase a property worth rupees 70 lakhs, you are liable to pay a TDS of rupees 70,000 to the government via established portals.

The TDS amount has to be submitted to the government. It should be kept in mind that this provision might be exempt from purchase of agricultural land. The TDS deduction on home purchases has to be made at the time of payment to the seller and it is essential that the amount be remitted within the time frame.

Nevertheless, because there are various considerations, it is essential to analyze some fundamentals regarding the applicability of TDS norms. For instance, in the case of TDS, the slab limit is 50 lakh rupees. What it means is that a property must be at least 50 lakhs in total cost or more so that TDS can be deducted.

Property Type and Individual Contribution

The type of property is another factor taken into consideration. TDS compliance for property buyers is applicable on immovable property, which includes residential property, commercial property, and even land holdings. However, it does not cover agricultural land which is located in rural areas. These can be purchased without TDS liability. Lastly, TDS norms clearly state that the liability to pay the tax deposit falls upon the buyer of the property.

An important update regarding TDS implications rolled out in 2024, and concerning properties with multiple buyers or sellers is that, in such cases, even if the individual contribution to the purchase is below 50 lakhs, TDS would still be applicable if the total cost of the property exceeds 50 lakh rupees. This means that even if you buy property in collaboration with another, bringing down your contribution to under 50 lakhs, but the total cost of the property exceeds that amount, you will be liable to pay TDS.

What Makes Total Cost

The repeated mention of the term ‘total cost of property’ refers to the complete amount of money that an individual pays for the purchase of any property. TDS on property purchase in Telangana also encompasses costs incurred for elements like utility charges, maintenance charges, parking fees, and club membership fees. In TDS calculation, these additional charges must also be included to gather the total cost, and hence the liability. In cases where an individual takes a home loan to purchase a property, the total cost incurred refers to the total value of the property, not just the down payment made by the buyer.

Paying The TDS

The process for paying TDS is quite straightforward and simple. The following are the steps that one must complete in accordance with TDS rules for residential properties to deposit the sum to the government.

Step 1: Visit the government’s official income tax website: www.incometax.gov.in
Step 2: Locate the ‘e-pay tax’ option and click on it.
Step 3: If you are a first-time user of the portal, you need to enter your PAN or TAN number, verify your identity through the OTP on your registered credentials, select the option ‘Pay TDS’, and then select the particular assessment year. Lastly, fill out all the details as required.
Step 4: If you are a registered user, you can quickly login with your credentials on the platform, go to the ‘e-file’ menu, then select ‘e-pay tax’, followed by ‘new payment’. Then select the particular assessment year, and go ahead with the ‘Pay TDS’ option.

To pay the TDS, buyers can choose from an assortment of payment methods including netbanking, debit or credit cards, UPI, or even RTGS/NEFT. The portal supports all major public and private sector banks, making payment simple and effortless.

During the payment of the TDS phase, form 26QB and form 16B need to be filled.
Form 26QB is designed for the purpose of TDS payment and reporting, which needs to be filled by the property buyer. It must be filed within 30 days from the end of month of TDS deduction. This return-cum-challan contains details about the property, PAN information for both parties, and payment information.
Form 16B is designed for the purpose of acting as proof of Tax deduction in the form of a TDS certificate. This form is generated by the TRACES portal, and must be completed within 15 days of filing form 26QB. This is a certificate which contains relevant information gathered from the other form and can be used for the seller’s claim for tax credit.

TDS Simplified At Levonor

The payment of TDS on Sale of Property is essential, and not an additional cost, but an advanced payment on tax which the buyer must make on behalf of the seller. Proper TDS support is thus vital, which is where we at Levonor help you. Our teams offer support and guide you with the relevant documentation, ensuring both parties are fully legally compliant.

Conclusion

TDS payment is a vital component of property buying in India. Without it, a buyer can incur penalties for non-compliance. It is as such vital for property buyers to be proactive and understand the process and needs for TDS comprehensively. This allows them to ensure that they pay the sum to the right authorities and file the required forms to ensure compliance and clarity.