INVESTMENT MANTRA - Deduct TDS on purchase of property

Jul 18 2015 : The Times of India (Pune)





A property buyer needs to deduct tax from the sale amount paid to the seller and deposit the amount deducted with the government

While purchasing property, under certain circumstances, a buyer has to deduct tax and remit it to the government. In order to facilitate better reporting of property transactions and payment of capital gains tax, the government introduced a Tax to be Deducted at Source (TDS) at the rate of one per cent on the value of the transfer of the property where the sale amount exceeds Rs 50 lakhs.However, agricultural land is exempt from this tax. Also, no deduction is to be made where the sale amount is less than Rs 50 lakhs.
The sum deducted as TDS has to be paid to the central government within a period of seven days from the end of the month in which the deduction was made. It has to be ac companied by a challancum-statement on Form 26QB. The buyer, responsible for deduction of the tax, has to furnish the certificate of deduction of the tax on Form 16B to the seller within 15 days from the due date for furnishing the challancumstatement on Form 26QB under Rule 31A after generating and downloading it from the income tax website. The tax deducted is to be deposited to the credit of the central government by remitting it electronically.
Against any payment for property, even as a part of an existing contract where an advance booking or part payment has already been made, on or after June 1, 2013, and where the total sale amount is more than Rs 50 lakhs, the buyer has to deduct and deposit tax at one per cent on the amount paid. It is to be noted that the limit of Rs 50 lakhs is only the sale amount and any charges towards delay etc., need not be taken into account. All payments towards development charges, parking space, sewerage charges etc., should be considered for the purpose of the limit. Charges such as club membership, if the club is attached to the ownership of the property, should also be considered for the limit of Rs 50 lakhs.
The tax is to be deducted at the time of each instalment paid of sale amount or each credit to the account of the seller. The rate for deduction is one percent if the seller has a PAN. In case the seller does not have a PAN the rate of TDS will be 20 percent. In the sale deed, agreement to sell or the general power of attorney, the net amount paid, tax deducted and deposited in the credit of the central government should be mentioned. In case of payment by instalments, the tax has to be deducted on the payment or credit of each instalment.
So, the buyer of a property is liable for deduction of tax, its deposit and issue of TDS certificate.