An easy Insight on TDS for Home Buyers
Nov 07, 2017 Legal Guidance
TDS or Tax Deducted at Source is a crucial aspect of a home buying process as the buyer needs to deduct the TDS from the transaction amount. Here are some useful facts about TDS and how it actually works.
TDS refers to the tax collection system by the government under which a certain percentage of tax is deducted in a transaction or in any income generation. It is the responsibility of the person who is deducting the tax amount to credit the amount with the government. The TDS deduction is applicable to the payments like brokerage, salary, commission, royalty, contract payments including property transactions.
Section 194-IA is a new clause in the Finance Act that includes details about tax deduction during making payments for the purchase of a property to an Indian resident. However, it is not applicable for a Non Resident Indian (NRI) seller. If the seller is NRI then the TDS is deducted under Sector 195 provisions. A buyer is supposed to deduct 1 percent as TDS from the total amount.
But remember, if the transaction amount is below Rs 59 lakh, then TDS deduction is not applicable. Similarly, if the amount is more than Rs 50 lakh then the TDS will be applicable on the entire amount. This implies that if the property is sold at Rs 1 crore then Rs 1 lakh will be deducted from the TDS amount.
Responsibilities of a home buyer
•When you buy a property, you are supposed to deduct the TDS that is 1 percent of the total amount.
•Mention the TAN or tax deduction account number in all the documents related to the TDS. A home buyer does not require a TAN number, he or she can use PAN in case of TDS.
•Do remember to credit the TDS amount with the government within the precise time limit. Also, maintain and file periodic TDS statements.
•Give TDS certificate to the payee so that he or she can have a record of the tax deducted
Lastly, it is mandatory to mention that failing to deduct TDS can get you into trouble. If you as a buyer fail to credit the TDS deducted with the government within a specific time period, then you might have to pat interest, penalty or even have to get imprisonment for up to 7 years. And if the buyer fails to deduct the TDS, in such case the seller has to pay the dues to the government, however, the seller will not face any action against him or her.
TDS refers to the tax collection system by the government under which a certain percentage of tax is deducted in a transaction or in any income generation. It is the responsibility of the person who is deducting the tax amount to credit the amount with the government. The TDS deduction is applicable to the payments like brokerage, salary, commission, royalty, contract payments including property transactions.
Section 194-IA is a new clause in the Finance Act that includes details about tax deduction during making payments for the purchase of a property to an Indian resident. However, it is not applicable for a Non Resident Indian (NRI) seller. If the seller is NRI then the TDS is deducted under Sector 195 provisions. A buyer is supposed to deduct 1 percent as TDS from the total amount.
But remember, if the transaction amount is below Rs 59 lakh, then TDS deduction is not applicable. Similarly, if the amount is more than Rs 50 lakh then the TDS will be applicable on the entire amount. This implies that if the property is sold at Rs 1 crore then Rs 1 lakh will be deducted from the TDS amount.
Responsibilities of a home buyer
•When you buy a property, you are supposed to deduct the TDS that is 1 percent of the total amount.
•Mention the TAN or tax deduction account number in all the documents related to the TDS. A home buyer does not require a TAN number, he or she can use PAN in case of TDS.
•Do remember to credit the TDS amount with the government within the precise time limit. Also, maintain and file periodic TDS statements.
•Give TDS certificate to the payee so that he or she can have a record of the tax deducted
Lastly, it is mandatory to mention that failing to deduct TDS can get you into trouble. If you as a buyer fail to credit the TDS deducted with the government within a specific time period, then you might have to pat interest, penalty or even have to get imprisonment for up to 7 years. And if the buyer fails to deduct the TDS, in such case the seller has to pay the dues to the government, however, the seller will not face any action against him or her.
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