How to Pay TDS on Purchase of Property | 2024 Updated

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May 17
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When purchasing property in India, one critical financial obligation you must fulfill is the payment of Tax Deducted at Source (TDS). This measure was implemented by the Indian government under Section 194-IA of the Income Tax Act to combat tax evasion. TDS on property applies to all transactions exceeding ₹50 lakh and ensures that taxes are collected at the source. Here’s a step-by-step guide on how to pay TDS on purchase of property.

Understanding TDS on Property Purchase

Contents

Understanding TDS on Property Purchase
Step-by-Step Guide to Pay TDS on Property Purchase
Common Mistakes to Avoid
Conclusion

Eligibility for TDS: TDS is applicable when the transaction value of the property is over ₹50 lakh. It is the responsibility of the buyer to deduct 1% of the transaction amount as TDS.

Transactions Covered: This tax applies to all types of property transactions excluding agricultural land.

Step-by-Step Guide to Pay TDS on Property Purchase

Step 1: Tax Deduction

When to Deduct: The TDS must be deducted at the time of payment to the seller. Whether the payment is in installments or a lump sum, 1% of each transaction should be deducted.

Step 2: Obtain TAN

Requirement of TAN: For TDS on property, buyers do not need to obtain a Tax Deduction Account Number (TAN). You can proceed with just your PAN and the PAN of the seller.

Step 3: Paying the TDS

Payment Portal: Use the online facilities provided by the Income Tax Department. Access the TDS payment portal through the official link provided on the e-payment section of the department’s website.
Form 26QB: Complete Form 26QB, which is a declaration of the TDS deducted on the property purchase. Ensure all details are accurate, including the PAN numbers of both buyer and seller, property details, and the transaction amount.
Online Payment: After filling out Form 26QB, proceed to make the payment online through internet banking. Banks that are authorized to facilitate this transaction will be listed on the portal.

Step 4: Generate and Issue a TDS Certificate

Form 16B: After the successful payment of TDS, you must download Form 16B from the TRACES website. Form 16B is the TDS certificate to be issued to the seller, confirming the tax has been deducted and deposited with the government.
Timeline for Form 16B: The form should be downloaded within 15 days of the TDS payment.

Step 5: Record Keeping

Proof of Payment: Keep a copy of the acknowledgment of the TDS payment, Form 26QB, and Form 16B safely as proof of compliance. These documents may be required for tax filings and future reference.

Common Mistakes to Avoid

Incorrect Details: Entering the wrong PAN details can lead to unnecessary legal and financial complications. Double-check all entries during form submission.
Delay in Payments: Delaying TDS payments or form submissions can result in penalties. Adhere strictly to the timelines prescribed by the tax authorities.
Overlooking Installments: If the property is being paid for in installments, remember to deduct TDS on each installment.

Conclusion

Paying TDS on a property purchase is a crucial step that aligns with legal tax compliance in India. By following the outlined steps, property buyers can ensure they fulfill their tax obligations accurately and efficiently. Always stay updated with any changes in tax laws related to property transactions to avoid any pitfalls.