TDS on Residential Property: All You Need to Know About It

Buying a residential property is a process powered by research and learning. Apart from making decisions like which locality is best suited to your and your family's needs, which developer has the best track record, or which amenities are must-haves, you will need to delve deeper into financial aspects like different types of housing loan products, circle rates, and tax deductions.

Here is all you need to know about the tax implications and regulations you must comply with when buying a property.

TDS on sale of property

As a home buyer, you need to be aware of the TDS (tax deducted at source) requirement on the sale of a property. Therefore, you will be required to provide proof of TDS at the time of property registration.

When is TDS on residential property levied?

When the value of the property being bought by you is over INR 50 lakhs, a TDS of 1% is levied on the transaction value (property value). As of 1 June 2013, if the seller of a property is Indian, a 1% TDS is levied on the sale. This is applicable on land, plots, flats, apartments, and industrial, commercial and residential properties except on the sale of agricultural land.
In case the seller is a non-resident Indian (NRI), a TDS of 20% + Surcharge + CESS is charged, irrespective of the value of the property.

How is TDS on property sale charged?

As mentioned above, all real estate sale, except agricultural land, comes under the ambit of TDS. In this context, it is important to note two points –
1. The TDS is not applicable on the GST component. This means that if you buy an under-construction property and a GST is levied on the property value, this GST is not subject to TDS.
2. The TDS is to be deducted irrespective of any Capital Gains or Losses incurred by the seller. This is relevant in the case of the resale of the property. In most cases, the sellers plan their taxes and apply for Capital Gains Deductions. TDS of 1% is to be levied irrespective of this.

Who deducts the TDS and deposits it?

As per the Income Tax Act, the buyer of the property is responsible for deducting the TDS from the amount paid to the seller. Under Section 203A, the buyer can apply for a TAN, but this is not mandatory. This TDS has to be submitted within 30 days of the end of the month. So if the property sale is concluded in January 2023 and TDS is deducted by the buyer, the TDS must be deposited with the government by the end of February 2023. This TDS can be deposited online or through the bank, and the details must be furnished online on the Form 26QB of the NSDL website. Since the seller has to furnish these details on their Income Tax filings, the buyer needs to furnish a Form 16 that can be downloaded on the TDSCPC website about a fortnight after depositing the amount.

Non-compliance of TDS on property sale

The onus of deducting the TDS on the property sale lies on the buyer. In case of delay in depositing the TDS of 1% on sale value, the buyer will need to pay an interest of 1.5% per month of delay. Late deposits may also attract a fine of up to INR 1 lakh.

Get expert guidance

Buying a residential property is a major decision on many fronts. If you are a first-time home buyer, you must find expert guidance in buying the property to provide you and your family with the life of your dreams and plan the finances without any stress. We at Blox offer homebuyers a high-tech-powered online portal to help them find the perfect property from verified developers. In addition, your relationship manager can help you understand the best avenues for negotiation with the builder. You may also want to consult a financial advisor to understand the nuances of the TDS deductions and how to deposit them.