As per the Income Tax Act, any company or person making a payment is required to deduct tax at source if the payment exceeds certain threshold limits. TDS has to be deducted at the rates prescribed by the tax department.
The company or person that makes the payment after deducting TDS is called a deductor and the company or the person receiving the payment is called the deductee. It is the deductor’s responsibility to deduct TDS before making the payment and deposit the same with the government. TDS is deducted irrespective of the mode of payment–cash, cheque or credit–and is linked to the PAN of the deductor and deductee. The TDS deduction provision applies to payments such as salary, interest, commission, brokerage, professional payments, royalty, contract a payment (which includes property transactions), etc.
And as a home buyer, it is a responsibility to deduct the TDS from the transaction amount on behalf of IT department.
TDS on Property:
Under Section 194-IA of the Income Tax Act June 1st, 2013, when a buyer makes a purchase of the immovable property (i.e. A building or part of a building or any land other than agricultural land) costing more than Rs 50 lakhs, then TDS must be deducted at a rate of 1 percent of the total amount of the property.
To make it simpler if the property value is less than Rs 50 lakhs then no TDS will be deducted and when the property value exceeds Rs 50 lakhs then TDS will be deducted for the entire amount and not only on the amount exceeding Rs 50 lakhs.
So if the property is sold at Rs 75 lakhs then the TDS amount of Rs 75,000 will be deducted.
Responsibilities of a Home buyer.
•TDS must be deducted at an applicable rate of 1 percent if the purchase amount is more than Rs 50 lakhs
•Homebuyer can use PAN card for remitting the TDS
• TDS must be credited to the government within the specified time period and also file the periodic TDS statements.
• Issuance of the TDS certificate to the payee with respect to the tax deducted.
Consequences of failure to deduct TDS or failure to deposit TDS timely:
TDS is always deducted from the buyer's end and in case buyer fails to deduct the TDS amount within a stipulated period, then it would attract “interest, penalty and rigorous imprisonment of up to seven years”. In such cases seller needs to pay the dues to the government, however, there will not be any strict action taken against Seller.