TDS on Purchase of Property for Resident Indians
TDS on Purchase of Property for Resident Indians
Introduction
As a resident Indian, purchasing a property involves various legal and financial obligations. One such obligation is the deduction of Tax Deducted at Source (TDS) while paying the seller for the property. This report provides an overview of the TDS requirements under Section 194IA of the Income Tax Act.
TDS Requirements
Section 194IA of the Income Tax Act mandates that a buyer must deduct TDS at the rate of 1% of the sale consideration while making a payment to the seller. This provision applies if the value of the payment is Rs. 50 lakh or more.
Key Points to Note
- The TDS rate is 1% of the sale consideration.
- The threshold limit for TDS deduction is Rs. 50 lakh.
- TDS is applicable on the entire sale consideration, not just the amount exceeding Rs. 50 lakh.
- The buyer is responsible for deducting TDS, not the seller.
- TDS must be deducted at the time of payment or credit to the seller's account, whichever is earlier.
Procedure for TDS Deduction
1. Calculate the sale consideration and determine if it exceeds Rs. 50 lakh.
2. Deduct TDS at the rate of 1% of the sale consideration.
3. Deposit the TDS amount with the government within the prescribed timeline (typically within 7 days from the end of the month in which TDS was deducted).
4. Furnish the TDS certificate (Form 16B) to the seller within 15 days from the due date of depositing the TDS amount.
Consequences of Non-Compliance
Failure to deduct TDS or deposit the TDS amount with the government may result in:
- Penalty and interest on the TDS amount
- Disallowance of the expense in the buyer's income tax return
- Legal proceedings against the buyer
Conclusion
TDS deduction on purchase of property is a critical compliance requirement for resident Indians. Buyers must ensure they deduct TDS at the rate of 1% of the sale consideration if the payment value exceeds Rs. 50 lakh. Timely deposit of TDS and furnishing of the TDS certificate to the seller are also essential to avoid any legal and financial consequences.