Taxation rules in India are constantly changing and we as responsible citizens are bound to comply with them. One of the taxation rules about buying an property in India is that you need to pay TDS during the property transaction. But do you know the amount of TDS on property purchase in India?
As a property buyer, there are a lot of queries that you might face about this TDS (Tax Deduction at Source) that needs to be paid, who pays it? For whom is it paid? On whose behalf is it paid? How much is the amount of TDS? and many more similar queries. Now let us address them one by one.
Let us first understand what TDS is. TDS stands for Tax Deduction at Source. The Government introduced this concept to collect tax at the source itself. In this concept, a person who is making any payment to a party should make the payment after deducting the stipulated amount as tax and shall pay it to the Government in the stipulated time.
This tax rate is different for all types of transactions. In case you are a salaried individual, you may have observed that your employer deducts a certain percentage from your salary on account of TDS and then pays the remaining amount to you. This is usually your take home salary. The employer then pays that deducted amount to the Government on your behalf.
Similarly, the amount that you pay to the developer while buying the property is an income for him and on this income, he is liable to pay income tax. Thus, like the employer in the above example, you need to deduct the TDS from the payment to the builder.
Is TDS on Property Purchase mandatory for all properties in India?
As per the Finance Bill of 2013, TDS is mandatory on property transaction exceeding INR 50 Lakhs. If you are buying any immovable property whose agreement value is less than 50 Lakhs, then you are not liable to pay TDS during the transaction.
What exactly is this TDS on Property Purchase?
A lot of people are confused about what TDS on property purchase is. Many of them wrongly assume that like the GST or Stamp Duty, TDS is another tax that your have to pay while buying a property. It is not an additional tax but it is just a compliance that you need to meet during a property transaction.
Lets take an example that Mr. Ashok is buying a property from XYZ Builders. In this case, whatever amount Mr. Ashok is paying to XYZ is the income for the builder. Thus just like TDS that an employer or a payer deducts from your salary or a payment, Mr. Ashok has to deduct 1% from XYZ’s payment and pay it to the Income Tax department on the behalf of XYZ builders. The builder in this case will receive that 1% in his next assessment year after meeting his tax compliances.
Who is liable to pay the TDS while buying a property in India?
As we have seen in the above example, Mr. Ashok i.e. the buyer is liable to pay the TDS. It is his duty by law to pay the TDS on property purchase and he cannot refuse to pay it. If the buyer does not pay the TDS on time, he may be liable to pay a penalty on it.
To whom does the buyer pay the TDS?
The buyer does not directly pay the TDS on property purchase to the builder or the owner. He needs to deposit the TDS in the Government treasury. If you are dealing with a builder or a property developer, they will usually collect a cheque from you of that particular TDS amount and their representative may pay it so that there are no errors from your side while paying the TDS.
How much is the amount of TDS to be paid while buying a property in India?
The amount of TDS on property purchase in India is 1% or 0.75% to be deducted from the sale consideration (depending upon the Date of Payment/Credit to the Seller). The consideration is the amount of cost that is mentioned in the sale-purchase agreement or the sale deed. If you are paying anything else as additional charges like clubhouse, maintenance, infrastructure, etc then these charges are not usually the part of the agreement value. So be careful while calculating the TDS amount.
Is this TDS amount over and above the agreement value?
No. TDS is not an additional tax, it is the part of the amount that you pay as agreement value. In short, out of the 100% amount that you pay the the builder or the owner of your property, he receives only 99% from you. The remaining 1% (which is the TDS) has to be paid separately and the owner/builder doesn’t receive it immediately.
Got more queries about TDS on Property Purchase?
The Realty Review is not an official tax consultation website and we only provide information based on our experience and observations. We urge you to use the information mentioned above only as a reference. If you have more queries about TDS on property purchase, you can visit the official website of the Income Tax Department at https://www.tin-nsdl.com/faqs/tds-on-sale-of-property/TDS-Introduction.html or consult a professional tax consultant or a chartered accountant.
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