TDS On Purchase OF Immovable Property | TDS On Sale OF Immovable Property in India

Before enumerating on TDS paid on the purchase of immovable property in India, let us first deal with the concept of TDS. 

According to the Income Tax Department of the Government of India, the basic notion of Tax Deducted at Source (TDS) had been introduced to collect tax from the very source of income. 

So, what does it mean? This means that a person who is liable to make a payment of some kind, who is referred to as the deductor, to another person, who is referred to as the deductee, will deduct tds on sale of immovable property and will remit the same amount to the account of the Central Government. 

In simple terms, TDS is the amount of money, i.e., tax, that is deducted by the deductor from the deductee (taxpayer) and is deposited to the Central Government. 

TDS is deducted when a certain kind of payment, like salary, rent, commission, interest, professional fees, etc., is paid. 

An example will make this clearer. You pay Rs. 20,000 as rent every month to the owner of a property. 

Let's assume that the TDS applicable is 10% of the rent amount. So, you will deduct Rs. 2,000 and pay Rs. 18,000 to the owner. 

Hence, following TDS, the owner will receive Rs. 18,000 and can add the gross amount of Rs. 20,000 to his income, acknowledging that Rs. 2,000 has already been deducted as TDS. 

This article will discuss TDS on purchasing immovable property in India. 

Types of TDS paid in India

Mentioned below are the sources of income that comes under the taxation of TDS – 

• Monthly salary 
• Interest paid by banks.
• The amount covered under LIC.
• Commission payments 
• Insurance commission 
• Interest in Securities
• Payment of rent 
• Winning from games like public lottery, etc. 
• Transfer of immovable property 

Payment of Tds on Purchase/Sell of immovable Property in India

If you are buying any immovable property in India, other than agricultural land, of Rs. 50 lakhs or more, you are required to deduct tax at the rate of 1% from the payment made to the one who has sold that property. 

This rule mentioned in Section 194IA of the Income Tax Act was introduced by the Finance Act of 2013. 

So, it is now known to us that the deduction of tax at source from payment on the transfer of certain immovable property is made following the provisions of Section 194-IA. 

Let us take a look at the provisions of Section 194-IA of the Income Tax Act, followed by the Income Tax Department of the Government of India. 

What are the major provisions of Section 194-IA of the Income Tax Act?

According to the Income Tax Act, the provisions of the Section 194-IA are as follows: 

• When any person, who is a transferee, pays an amount to a transferor by consideration of transfer of an immovable property (other than agricultural land) shall deduct an amount equal to 1% as an income tax under the following condition – when the credit of the amount to the account of the transferor is in cash or by cheque or by draft or any other mode. In simple terms, under this provision, the buyer is required to deduct the tds on sale of immovable property and not the seller at 1% of the total sale consideration.
  
• You do not need to pay TDS if the sale consideration is less than Rs. 50 lakhs.
  
• When a payment is paid in multiple instalments, the TDS must be deducted from each instalment. 
• When there is a consideration made for immovable property in India, it shall include all charges like the nature of club membership fee, car parking fee, electricity/water fee, maintenance fee, or any other fee of any similar nature. These charges are incidental to the transfer/purchase of the immovable property. This provision has been included after 1 September 2019.
  
• The TDS must be paid on the entire sale amount, not just the profit amount. For example, if you buy a Rs. 30 lakh house for Rs. 35 lakhs, you need to pay TDS on Rs. 35 lakhs and not on Rs. 5 lakhs. After the amendment of Section 194-IA, if you have paid Rs. 1 lakh on car parking fee and Rs. 2 lakhs on electricity and water facilities, then your entire sale amount or total sale consideration will be Rs. 38 lakhs, and you need to pay TDS on Rs. 38 lakhs at 1%.
  
• For making a TDS payment on immovable property, the buyer must obtain a Tax Deduction Account Number (TAN). You can also make the payment through your PAN card.
  
• It must also be noted that the TDS on immovable property in India has to be paid within 30 days from the end of the month in which the TDS was deducted using Form 26QB.
  
• After you deposit the TDS to the government, the buyer is also required to produce a TDS certificate to the seller through Form 16B. This will be available 10-15 days after depositing the TDS.

What is tds on purchase of immovable property in India?

TDS stands for Tax Deducted at Source. The TDS on Immovable Property in India is a tax that is to be deducted by the buyer at the time of payment and deposited with the government. 

The TDS applies to any property transaction above a certain threshold. Its main purpose is to discourage buyers from using black money to purchase property and to help the government track large transactions in the real estate market. 

The tds on purchase of immovable property in India is calculated as a percentage of the total property value. 

The percentage varies depending on the type of buyer – for individuals, it is 1%; for companies, it is 5%. 

This amount is then deducted from the total amount and deposited with the government. 

Who is responsible for tds on sale of immovable property in India?

The TDS on Immovable Property in India is the responsibility of the buyer. The buyer is required to deduct the TDS at the time of payment and deposit it with the government. 

The buyer is also responsible for submitting the TDS return to the government.

When is TDS on Immovable Property in India payable?

The TDS on Immovable Property in India is payable at the time of payment for the property. 

The buyer is responsible for calculating and deducting the TDS from the total payment and depositing it with the government. Failure to do so can result in financial penalties from the government.

What is the rate of TDS on Immovable Property in India?

The rate of TDS on Immovable Property in India varies depending on the type of buyer. 

For individuals, it is 1%, and for companies, it is 5%. The amount is calculated as a percentage of the total property value and is deducted from the total payment amount. 

What are the exceptions to TDS on Immovable Property in India?

There are certain exceptions to the TDS on Immovable Property in India. Transactions with certain government agencies or entities are not subject to TDS, and the sale of agricultural land or land used for educational purposes is also exempt. 

Further, gifts of property below Rs.50,000 and inheritances of any value are also not subject to TDS.

How can TDS on Immovable Property in India be avoided?

One way to avoid TDS on Immovable Property in India is to enter into a lease agreement with the seller instead of purchasing the property. 

Under the lease agreement, the seller will receive a fixed amount from the buyer over some time. 

This will avoid the payment of TDS on the property since it is not considered a sale. 

Another way to avoid TDS on Immovable Property in India is to purchase the property in installments. 

Under this method, the buyer will pay the property in installments over a period. 

Each instalment is only subject to TDS when it is paid rather than when the property is purchased in its entirety.

Read More,

How To File A TDS Return Online

What Are the Different Types of Tds?

Conclusion

The TDS on Immovable Property in India is a controversial but necessary tax that the Indian government has instituted. 

It applies to any property transaction above a certain threshold and is paid by the buyer before completion. 

It is important to be aware of the TDS regulations in India before entering into any real estate transactions. 

Fortunately, there are ways to avoid paying the TDS on Immovable Property in India, such as entering into a lease agreement with the seller or purchasing the property in installments. 

Ultimately, the buyers must be aware of the regulations and make appropriate payments to the government.

Hence, we can conclude that the TDS on immovable property in India is a useful way for the government to ensure that taxes are paid on any gains or profits made from the sale of property in India. 

It is important for both the buyer and seller to understand the applicable TDS rates and to ensure that the correct amount of TDS is paid. Failure to comply with the TDS regulations can lead to penalties and fines. 

FAQs Related to TDS on sale of immovable property

1. What does TDS stand for? What is TDS on immovable property in India?

TDS stands for Tax Deducted at Source. The TDS on Immovable Property in India is a tax that is to be deducted by the buyer at the time of payment and deposited with the government.

2. How is TDS on the purchase of immovable property determined in India? 

The deduction of tax at source from payment on the transfer of certain immovable property is made following the provisions of Section 194-IA.

3. Are there any exceptions to TDS on the purchase of immovable property in India?

Yes, transactions with certain government agencies or entities are not subject to TDS, and the sale of agricultural land or land used for educational purposes is also exempt. Further, gifts of property below Rs.50,000 and inheritances of any value are also not subject to TDS.

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