Buying property above Rs 50 lakh is considered a major financial investment. With careful planning, buyers must ensure all documents such as sale deed, title clearance, etc are properly verified before purchase.
Ensuring proper due diligence in cases of property purchase helps avoid legal disputes in the future. At the same time, such purchases also trigger tax compliance for buyers. Tax Deducted at Source (TDS) provisions may apply and reporting of the transaction is important for income tax records to avoid any potential penalties.
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What buyers should know about TDS rules
If one buys any immovable property like land, house or building from a resident Indian for Rs 50 lakh or more, TDS is applicable. Buyers must fully understand TDS related tax compliance laws to ensure that their investment doesn't turn into legal trouble.
As per the rules, the buyer is responsible for deducting and depositing the tax with the government. If the transaction value crosses Rs 50 lakh, they must deduct TDS at 1% under Section 194-IA of the Income Tax Act. This TDS is deducted on the total sale consideration at the time of payment or credit, whichever happens first.
To be clear, Tax Deduction Account Number (TAN) is not required for this process, the Tax2Win website explained. However, buyers need to submit PAN card details. If the seller does not have a PAN, TDS will be deducted at 20% instead of 1%, the income tax department explained on his website.
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Buyers must also note that the TDS is calculated on the full sale consideration, not just the amount exceeding Rs 50 lakh. If payment is made in installments, TDS at 1% must be deducted on each installment when it is paid or credited.
To complete the process, buyers are required to fill and submit Form 26QB online through the official TIN-NSDL portal. This rule applies to all immovable properties such as land, residential houses, and commercial buildings. However, it does not apply to agricultural land, which is excluded from TDS provision.
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