TDS or tax deducted at source refers to the process of collecting income tax at source by the government of India. It is a kind of spot deduction of tax from the original source of income. TDS is deducted as per the Indian Income Tax Act, 1961. TDS is controlled by the Central Board for Direct Taxes and it is a part of the Indian Revenue Service Department.
TDS is an indirect way of collecting income tax. It is imposed on incomes received from several financial products and business transactions. For examples, interest income received from fixed deposits, incentives and commissions, dividends, payment received for various services, sale, rent and purchase of immovable property and awards earned as money – these are some of the sources of income where TDS is applicable. The deduction of TDS may vary from 1% to 30% based on your source of earnings.
When is TDS on Property Purchase Required?
TDS must be deducted from all immovable property purchase. Immovable property means land or any building, other than agricultural land. In the following cases, TDS on property purchase is not required:
- When the immovable property transferred is rural agricultural land.
- When the immovable property is being compulsorily acquired under any law by the Government.
- When the total amount of consideration paid for the purchase of immovable property is less than Rs.50 lakhs.
TDS must be deducted during a property purchase at the time of transfer of money to the account of property seller or at the time of payment of any money in cash or by cheque or demand draft. This is how the TDS on purchase of property works.
Procedure for Remitting Deducted TDS on Property Purchase
- Allahabad Bank
- Andhra Bank
- Axis Bank
- Bank of Baroda
- Bank of India
- Bank of Maharashtra
- Canara Bank
- Central Bank of India
- Corporation Bank
- Dena Bank
- HDFC Bank
- ICICI Bank
- IDBI Bank
- Indian Bank
- Indian Overseas Bank
- Jammu & Kashmir Bank
- Oriental Bank of Commerce
- Punjab and Sind Bank
- Punjab National Bank
- State Bank of India
- Syndicate Bank
- UCO Bank
- Union Bank of India
- United Bank of India
- Vijaya Bank
TDS Rate on Property Purchase
The TDS rate for property purchase is 1%. Surcharge and secondary and higher education cess (SHEC) need not be added. If the property seller does not have PAN or if PAN is not quoted, then TDS must be deducted at the rate of 20%. At this rate only, the TDS on property purchase will be deducted.
Form 16B - TDS on Purchase of Property
All persons responsible for TDS on property purchase are required to furnish a certificate to the seller in Form 16B within 15 days of the due date of filing Form 26QB. To prepare and download Form 16B, the taxpayer who are responsible for TDS on property purchase can follow the steps mentioned below:
- Login to TRACES.
- Go to Downloads tab.
- Select Form 16B.
- Enter the details and click on go.
FAQs
Who is responsible for deducting TDS on property purchase?
The buyer of the property is responsible for deducting TDS when purchasing immovable property from a resident seller.
Is TDS applicable on all types of properties?
TDS is applicable to all types of immovable properties, except agricultural land in rural areas and properties compulsorily acquired by the government.