Purchasing property is a significant investment that comes with various legal and financial obligations. One such obligation is the deduction and depositing of Tax Deducted at Source (TDS). In India, buyers are required to deduct TDS on the purchase of property and deposit it with the Income Tax Department. This article aims to provide a unique and informative guide on the process of depositing TDS, ensuring compliance with the law and avoiding penalties.
Understanding TDS on Property Purchase
Tax Deducted at Source (TDS) is a mechanism introduced by the Indian government to collect tax at the source of income. When it comes to property transactions, the buyer is responsible for deducting TDS and depositing it with the tax authorities. The TDS rate for property transactions is 1% of the total consideration value, provided it exceeds ₹50 lakhs. The buyer must ensure compliance with the rules to avoid penalties and legal repercussions.
Step-by-Step Guide to Depositing TDS
Obtain a Tax Deduction Account Number (TAN)
Before proceeding with TDS deposit, the buyer needs to obtain a TAN from the Income Tax Department. TAN is a unique ten-digit alphanumeric code that is mandatory for TDS compliance. The application for TAN can be submitted online or offline by filling Form 49B and paying the required fee.
Deduct TDS from the Seller’s Payment
At the time of making the payment to the seller, the buyer needs to deduct the applicable TDS amount. This deduction should be made on the total consideration value, including any additional charges such as parking fees or club membership. The TDS rate is 1% if the property value exceeds ₹50 lakhs.
Calculate the TDS Amount
To calculate the TDS amount, multiply the total consideration value by the applicable TDS rate (currently 1%). For instance, if the property value is ₹60 lakhs, the TDS amount would be ₹60,000 (₹60 lakhs * 1%).
Fill Form 26QB
The buyer is required to fill Form 26QB, available on the Income Tax Department’s website. Provide accurate details about the buyer, seller, property, payment, and TDS amount in the form. Ensure that all the details are correctly filled to avoid any discrepancies.
Generate the TDS Certificate
After submitting Form 26QB, a unique acknowledgement number will be generated. Use this number to download the TDS certificate in Form 16B from the TRACES website. The TDS certificate serves as proof of tax payment and must be provided to the seller.
Deposit TDS Amount
Within seven days from the end of the month in which TDS was deducted, the buyer must deposit the TDS amount with the authorised bank. Use the challan ITNS 281 for TDS payment and mention the correct details, including the TAN, acknowledgement number, and other relevant information.
File TDS Return
Lastly, the buyer needs to file a TDS return in Form 26QB within thirty days from the end of the quarter. This return should include details of the TDS deducted and deposited. Failure to file the return can lead to penalties.
FREQUENTLY ASKED QUESTIONS
What is TDS on property?
The purchaser of an immovable property (other than rural agricultural land) worth Rs 50 lakh or more is required to pay withholding tax at the rate of 1% from the consideration payable to a resident transferor.
Who is responsible to deduct the TDS on sale of Property?
According to rules in respect of tax deducted at source, buyers of the property would have to deduct the TDS and deposit the same in the Government treasury.
Depositing TDS on the purchase of property is an essential responsibility for buyers in India. By following the step-by-step process outlined above, buyers can ensure compliance with the law and avoid penalties. Remember to keep accurate records and seek professional assistance when needed to navigate the complexities of TDS compliance.