TDS on Property Purchase: A Step-by-Step Guide
This article explains the concept and steps for calculating TDS on purchasing property from builders, on resale or from NRIs, with and without a home loan.
This article explains the concept and steps for calculating TDS on purchasing property from builders, on resale or from NRIs, with and without a home loan.
To track the buying and selling of residential property, TDS must be deducted by the buyer and deposited in the Income Tax portal.
TDS on immovable property is covered under Section 194IA.
TDS is to be paid whenever payment is made to the seller. The buyer must deposit the TDS amount by the last date of the following month after the payment.
If, for example, the buyer makes the payment on 15th July, the TDS must be deposited by 30th August. Please deposit the TDS by this date to avoid a penalty of 1% per month if the TDS is not filed. In case of a TDS payment default, the property will not get registered.
There is no relationship between the property registration date, builder-buyer-agreement date or any date other than the payment date for TDS calculation.
The same logic of payment date is applied when payment is in installments, like in the case of an under-construction property.
The TDS value depends on the seller’s tax residency status.
The basic rule for a 1% TDS-eligible property deal is
Buyer pays 1% to the government, 99% to the seller
TDS is calculated on the registered agreement value (or builder-buyer-agreement amount) without GST.
If there are multiple buyers, or sellers, or both, the TDS is still calculated as per the rules above. Each buyer has to individually calculate and deposit TDS on the amounts they have paid.
TDS is paid on the whole consideration paid to the seller, irrespective of the source of funds. For a home loan-funded deal, TDS works like this:
The above calculation is valid even if payment is made for an under-construction property in multiple phases, with GST, like this:
Payment made | Phase 1 | Phase 2 | Phase 3 | Total |
---|---|---|---|---|
% Amount | 30% | 40% | 30% | 100% |
Bank gives | 22,50,000 | 30,00,000 | 22,50,000 | 75,00,000 |
TDS @ 1% | 26,400 | 35,200 | 26,400 | 88,000 |
Buyer pays to builder | 7,23,600 | 9,64,800 | 7,23,600 | 24,12,000 |
Total paid in phase | 30,00,000 | 40,00,000 | 30,00,000 | 1,00,00,000 |
The buyer will get an income tax notice to pay the remaining TDS: What is a hidden risk about TDS what buyers must consider before property purchase?
We will cover registration for TDS, Form26QB / Form16B, PAN or TAN and other considerations in the next part of this article here: How to file TDS for Property Purchase: A Step-by-Step Guide.
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This post titled TDS on Property Purchase: A Step-by-Step Guide first appeared on 30 Aug 2023 at https://arthgyaan.com