TDS on Property Purchase in India

TDS on Real Estate Purchase @ 1% under Section 194IA

TDS Deductions on Property Purchase – What You Need to Know

Yes, TDS on real estate purchase is applicable under Section 194IA. Read on to find out what kind of property attracts TDS, what amount of sale value attracts TDS, how to make TDS payment on purchase of property, how to deduct TDS on purchase of property from NRI, and what happens if TDS is not deducted on purchase of property.

TDS Deductions on Property Purchase Above 50 Lakhs 

If the transaction value of a property is above Rs. 50 lakhs, then, under Section 194IA, the buyer has to make a TDS on real estate purchase @1% of the total amount paid to the seller, excluding the GST.

For Example:

Transaction value

70,00,000

GST

8,56,000

Total amount paid to seller

78,56,000

Amount for calculating TDS

70,00,000

TDS on purchase of property @1%

8,56,000

What Types of Property Sale Attract TDS

TDS deductions on property purchase above Rs. 50 lakhs is applicable for residential property, commercial property, and industrial property. TDS has to be deducted on all types of property – whether vacant plot or constructed buildings, including flat, villa, or independent house. Only agricultural land is excluded for TDS deduction on the purchase of property.

TAN/PAN Requirement for TDS on Real Estate Sale 

The buyer is not required to have a TAN (Tax Deduction Account Number) to deduct the tax. The buyer has to, however, quote their PAN as well as the seller’s PAN while deducting TDS on the purchase transaction.

Form 16B for TDS on Purchase of Property 

The buyer has to issue Form 16B to the seller for TDS on the purchase of property. Form 26QB is a return-cum-challan for the payment of TDS to the government. It is also the TDS certificate issued by the buyer to the seller for TDS deducted. The seller can use the information when they are filing their own IT returns for the financial year in which the property sale was accomplished.

How to Make TDS Payment on Purchase of Property 

The TDS deducted by the buyer while making payment to the seller needs to be deposited within a period of 30 days from the end of the month in which the deduction has been made. For e.g., if the TDS has been deducted in the month of July, it should be deposited to the government before 31st August.

TDS On Purchase of Property From NRI 

TDS on sale of property @ 1% under Section 194IA applies in a case where the property is purchased from residents of India. But when it comes to TDS on the purchase of property from NRI (non-resident Indian), the rules are a bit different.  

  • If there are short-term capital gains,  then TDS on the purchase of property from NRI applies at the rate of 30%. The said amount has to be deducted before making the balance payment to the seller. 
  • If there are long-term capital gains, then TDS on the purchase of property from NRI is deducted at the rate of 30%. 
  • In both the cases, i.e., whether there are short-term or long-term capital gains, and whether the tax is deducted at 20% or 30% of sale value, there would be additional cess and surcharge as applicable.
  • TDS on purchase of property from NRI must be deducted at the time of making the payment to the NRI, and this information should be mentioned in the sale deed. 
  • There is no minimum sale value for the application of TDS on the purchase of property from the NRI seller. This means that TDS would apply on sale values even less than Rs. 50 lakhs.
  • The buyer must obtain a TAN to deduct TDS on the purchase of property from NRI.
  • The TDS deducted by the buyer should be deposited to the government on or before the 7th of the next month in which the TDS is deducted. 
  • It can be deposited by the buyer through banks that are authorized by the government of India or the Income Tax Department to collect direct taxes.

What Happens If TDS Is Not Deducted On Purchase of Property 

Non-deduction of TDS on Purchase of Property 

If TDS is not deducted on the purchase of property, then the buyer would need to add interest at 1% per month for the period from the date on which the deduction was to be made - to the date on which the deduction was made.

Non-remittance of TDS on Purchase of Property 

If a buyer fails to make payment to the government of TDS on purchase of property, then he or she would need to pay interest at 1.5% per month for the period from the date on which the payment was due - to the date on which the payment was made.