As per section 194-IA of the Income Tax Act, 1961 (‘the Act’), TDS on purchase of Property from a resident in India is levied @ 1% on transaction of properties where the total transaction value is more than INR 50 Lakhs.
However, it is important to note that TDS @1% is applicable only where the seller is Resident in India as per the provisions of Section 6 of the Act. Whereas if the seller is Non-Resident in India i.e. he/she is an NRI, then the rate of TDS will be as per section 195 of the Act (as per the slab rates of the NRI).
Thus, the buyer of the property (whether resident or non-resident) is mandatorily required to deduct and deposit TDS @1% while making payments to the resident individual where the value of the property exceeds INR 50,00,000/-.
It is to be noted that TDS is to be deducted on the total amount paid to the Seller excluding GST component if any. For example, if the value of the property is 1 Crore and GST is say 5% i.e. 5,00,000. Here, the TDS would be required to be deducted on the Transaction Value of Property i.e. Rs. 1 Crore and not on the GST levied on sale of property. Therefore, the TDS to be deducted would be 1% of Rs. 1 Crore i.e. INR 1,00,000.
It is worthwhile to note that TDS is required to be deducted in all cases irrespective of the Capital Gains arising to the Seller or not. The seller may claim refund of TDS withheld in a scenario where the TDS deducted exceeds the tax liabilities of the seller.
Separately, in case of Home Loans, the TDS would be deducted when the payment is made to the Seller and not when the EMI is paid to the Bank
Points to be remembered by the Purchaser of the Property:
Deduct tax @ 1% from the sale consideration (depending upon the Date of Payment/Credit to the Seller).
Make payment of tax on e-filing portal under section 194-IA of the Act and obtain challan copy.
Collect the Permanent Account Number (PAN) of the Seller and file TDS return in Form 26QB providing requisite details.
PAN of seller as well as Purchaser should be mandatorily furnished in the online Form i.e. Form 26QB.
Points to be remembered by the Seller of the Property:
Provide PAN to the Purchaser for furnishing information regarding TDS to the Income Tax Department.
Verify deposit of taxes deducted by the Purchaser in your Form 26AS Annual Tax Statement.
