Buying a property is one of the most crucial and long term investment decisions taken by individual buyers. In 2013, with an aim to track high value real estate transactions the government introduced a new concept known as TDS or tax deducted at source provisions for property buyer. Hence, with the effect from June 1, 2013,a buyer of a fixed property otherwise than owner of agricultural land valued at Rs 50 lakh or more is mandatorily required to deduct TDS at the rate of 1% from the amount payable to a resident transferor. The TDS deducted would have been then deposited with the government treasury within the stipulated time frame. It is important to mention that the seller of a property makes a loss or makes tax savin investment to claim long-term capital gain exemption; he may not have to pay tax on capital gain. In such a situation, the seller would have to refund his return of income for the tax deducted by the buyer. Below here are certain points that buyer needs to consider while deducting tax on the purchase of the property.
Tips that you need to consider before charging TDS
Tip 1-Deduct TDS at time of making sales consideration-can be in instalment or full-The buyer at first is required to deduct TDS at the time of making the payment-even if it is an advanced instalment or full payment of TDS. TDS has to be deducted on sales consideration. The sale of transfer of property is not as important as you think it is.
Tip 2- it should be deducted on the consideration- the next point that you need to consider about property TDS is it should be deducted on the consideration amount and not on amount exceeding Rs 50 lakh.
Tip 3- when the buyer should deposit money- the next point the buyer needs to consider is when he/she needs to deposit money. It is deducted into government treasury within the period of 7 days from the end of the month in which deduction is done. Delay in deduction of amount or depositing in tax may lead to further consequences like as under:
Interest at the rate of 1% per month from the date of tax was deductible till the date when tax was deducted.
Interest at the rate of 1.5% per month from the date tax was deducted till the date of the payment.
A deductor of tax is required necessarily to obtain a Tax Deduction Account Number or TAN. However, in the case of purchase of the property, the buyer is not required to obtain TAN. In case, PAN of the seller is not available in handy, minimum TDS 20% is mandatorily required to be deducted.
Tip 4- buyer has to furnish all details- The buyer of the property needs to furnish all details like transaction information online on TIN website that is in Form 26QB, electronically.
Tip 5- ensure that all details are mentioned accurately- next tip that buyer needs to consider is make sure that the details of PAN are mentioned correctly. There is no online mechanism for any error rectification in the form. In case of any error while filing the online form, the buyer needs to approach the Assessing Officer or CPC-TDS for rectification of all the errors.
Tip 6- what if there are more than one buyer or seller- If there is more than one buyer or seller, form 26QB needs to be furnished for each details. The tax withholding provisions would apply for below-mentioned cases as well:
Where the cost of the property paid by each buyer is less than 50 lakh, but the overall transfer amount is Rs 50 lakh or more than that.
Where the cost received by the seller is less than Rs 50 lakh, but overall amount is Rs 50 lakh or more than that.
Tip 7- what deductor is required to do- after successfully furnishing all the details of the transaction the deductor can:
Either do all the payment through online mode (through e-tax payment option) immediately
Or make payment through net banking account by visiting any authorized bank office.
Tip no 8- what if the tax is deposited- once the full amount of tax is deposited and form 26QB is filled, the buyer needs to issue a form called as Form 16b (or popularly known as TDS certificate) to the seller of the property. Form 16B can be easily downloaded from the website of Centralized Processing Cell of TDS (cpc-tds)
Website domain details:www.tdscpc.gov.in
Last but not the least; it is pertinent to notice that if the buyer is unable to comply with the afore-mentioned provisions or is unable to follow above-mentioned instructions he/she will be liable to attract penalty in form of interest rates and a fine for buyer.
If you are planning to buy a property, it is important to consider lawful details otherwise you may have to face the consequences. In above-mentioned post, we have mentioned all the information about TDS charges for the buyers and in case the buyer fails to comply with all the above-mentioned clauses, interest and penalty can be charged.
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