Thinking of buying property? TDS on immovable property

A couple from India, namely Rima and Dinesh, recently purchased a new home. They recently moved in. This is their dream home that Dinesh wanted to buy for a very long time. Certainly they were very happy until, the postman arrived.

The postman was carrying a notice from Income tax department. The notice was about the unpaid income tax to the department. The income tax notice said that, Dinesh had paid more than Rupees 50 Lakh for his new house to the seller of property.

However, 1% of TDS on income tax was not deducted or paid to Government Treasury. Now he has to pay the TDS amount along with the penalty.

The demanded amount was more than one lakh Rupees. After reading the notice, Dinesh immediately called the original owner of the house and explained him the whole situation. Dinesh requested him to refund the TDS amount, which he had forgotten to deduct while paying him.

The original owner shirked his responsibility. He said, he had spent all his money by making other investments & now he has no money left to refund Dinesh. Eventually, with no other solution in sight, Rima and Dinesh paid the TDS amount along with the fine to the Government.

What does Income tax act say?

According to the Income Tax Act, if you are buying immovable property other than agricultural land, and the consideration amount to be paid is more than Rs.50 lakh, then you have to deduct 1% TDS i.e. tax from consideration amount paid to the Indian resident owner of that immovable property. Here are some of these income tax provisions related to this.

1. This provision of income tax applies to sale of immovable properties situated in India except agricultural land. TDS is applicable only if the consideration amount paid to the owner is more than Rs. 50 lakhs.
2. The provision is applicable even if the market value sale of property or the stamp duty value is less than Rs. 50 lakhs.
3. If there is more than one owner of single immovable property and the consideration amount received by each owner is less than Rs. 50 lakhs but the total consideration amount is more than Rs. 50 lakhs, then 1% TDS i.e. tax deduction is required.
4. This provision does not apply in case , if there is one owner for more than one immovable property and the total consideration amount is more than Rs. 50 lakhs and consideration of each property is less than Rs. 50 lakhs. Example: If you are buying three shops of the same owner and the consideration of the shops is twenty lakhs each, even if the total consideration is more than fifty lakhs rupees, then 1% TDS i.e. tax deduction is not required.
5. From September 2019, total consideration to be paid to the owner includes all amounts paid in the name of car parking charges, electricity connection charges, water connection charges, and society establishment charges, etc. Similarly, if the total amount is more than Rs. 50 lakhs, then 1% TDS i.e. tax deduction is required.
6. It is mandatory for the owner and the buyer to have a PAN of the seller for a tax deduction. If the owner or seller of the property does not have PAN, the TDS deduction is 20% instead of 1%. For this, the owner’s PAN must be taken first. TDS deducted from each amount of consideration must be paid within the next seven days.

1.What is TDS?

The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source, and remit the same into the account of the Central Government.

A TDS Return is a quarterly statement, which has to be submitted to the Income Tax Department of India. Submitting TDS Return is mandatory if you are a deductor. It has details of TDS deducted and deposited by you.

For eg., Mr. Gaonkar rented an apartment and paying more than Rs.50,000/-, then he must deduct 5% of the rent and pay the remaining to the landlord. The deducted 5% is the TDS, that he must file under his TDS return.

2.What are the different TDS related forms?

Form 24Q Statement – for tax deducted at source from salaries.

Form 26Q Statement – for tax deducted at source on all payments except salaries.

Form 27Q statement – for deduction of tax from interest, dividend, Rental, Capital Gains or any other sum payable to non-residents.

Form 27EQ Statement – for the Collection of tax at source (TCS)

3.What are the TDS filing Due Dates?

Quarter Quarter Period Last Date of Filing

1st Quarter 1st April to 30th June 31st July

2nd Quarter 1st July to 30th September 31st Oct

3rd Quarter 1st October to 31st December 31st Jan

4th Quarter 1st January to 31st March 31st May