While buying any kind of property, there are many legal considerations to keep in mind. There is a lot of hassle involved in the whole ordeal. Finding the perfect property can take very long and even after that, there is the matter of negotiations, legal fees, transfer of ownership etc. In the midst of all this, there are also many tax laws to keep in mind. It can be quite easy to slip up and forget some of your tax duties in all of the confusion.
When buyers of property make a purchase worth more than 50 lakh, it is mandatory to deduct TDS (Tax Deductible at Source). 1% TDS is charged on the total transaction amount and it must be deposited in the account of the income tax authorities in a prescribed format. This has been laid out in Section 194-IA of the Income Tax Act.
There are many points to keep in mind when filing TDS on property sale:
1. Under this rule, property is classified as any piece of land, a building or even part of a building. However, agricultural land is exempt from this rule.
2. This law about TDS is applicable even when there is more than a single buyer/seller. The only criterion is that the transaction amount should be more than 50 lakh.
3. It is the buyer who is supposed to deduct TDS, not the seller of the property. If you are the seller of the property, ensure that your buyer files TDS on your behalf. If this is not done, the seller shall not be able to claim credit for the payment.
4. The tax has to be deducted on the entire amount of the purchase and not just the amount over the ceiling of 50 lakh.
5. The seller has to provide their PAN number for the purpose or else TDS is deducted at 20%.
What is the process?
The buyer has to obtain Form 26QB, fill in the details, and submit it. This has to be done within thirty days of the month in which the TDS amount was deducted by the buyer. The form requires information about both the buyer and the seller such as name, address, PAN numbers etc. Keep these in hand before getting down to the task.
This form can also be filled online here. Once the form is filled, the buyer can pay online through net banking facility and print out the Challan 280 (this is an acknowledgement of your payment, keep it safely) In case the buyer cannot pay online, an online receipt for the form is generated with a Unique Acknowledge Number. This has to be taken to any of the authorized banks within 10 days.
Once the payment is made, the approved form 26QB or form 16B can be downloaded by logging onto (or registering) onto TRACES as a tax-payer. This form must be provided by the buyer to the seller as proof of the payment.
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