TDS on Sale of Property

When a builder or an individual seller sells a property to you, they have to pay income tax on the capital gains arising out of the sale transaction. To record these income tax accruing on sale transactions at the transaction stage itself the government expects you, as a buyer, to deduct a portion of this income tax and deposit it with the tax department.

It’s called TDS – Tax Deducted at Source. The concept is very similar to your TDS deductions happening in the monthly salary payment. It’s your income tax that your company is deducting at source and remitting it to the government month on month. The responsibility of the TDS in case of your salary lies with your company and not you as a recipient of the salary.

On the very same lines the responsibility of deducting tax on the sale consideration lies with the Purchaser and not the Seller. You as a Purchaser will be held responsible by the tax authorities in case this TDS is not remitted.

The rules of TDS - In case the seller is a Resident Indian (Desi Chorra And/or Chorri)

1)  How much TDS to be Paid: It is 1% for all sale involving a resident Indian seller. The purchaser has to deduct 1% of the sale value and remit it to the government on behalf of the seller just as your company deducts TDS from your salary and remits it to the government.

2)  What is the underlying condition? - For all sale transaction having sale consideration of above 50 lakhs TDS of 1% of the sale value has to be deducted.

Your deal value is inclusive of the 1% TDS. Suppose you decide to buy a property from an existing owner who is a resident Indian for Rs 60 lakhs then the break-up of the deal will be as follows.

3) Who is Responsible to pay the TDS - We reiterate, the responsibility of paying this TDS is with the purchaser.

4) What is the IT section under the TDS has to be paid - The relevant section under which this payment has to be made is 194-IA of Income Tax Act.

5) How to Pay - There are more than 2 dozen websites which will help you with the step-by-step procedure on how to pay this TDS.

6) TDS Challan - Once you remit the TDS the government will issue a TDS Paid Challan which has to be produced at the time of registering the property.

Summary of 1% TDS

The rules of TDS - In case the seller is a Non-Resident Indian (Vilayati Chorra and/or Chorri)

The TDS requirement is different in case the seller is a Non-Resident Indian.

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