TDS on Sale/Purchase of Immovable Property

In India, TDS (Tax Deducted at Source) is applicable to the sale and purchase of immovable property under certain conditions. The provisions related to TDS on the sale and purchase of immovable property are outlined in Section 194-IA of the Income Tax Act, 1961.

1. TDS on Purchase of Immovable Property (Section 194-IA)

When an individual or entity buys immovable property (other than agricultural land), the buyer is required to deduct TDS at the time of making payment to the seller.

Key Points:

• Applicable to: The buyer (whether an individual, HUF, or other entities) is responsible for deducting TDS.
• Rate of TDS: The rate of TDS is 1% of the purchase price.
• Threshold Limit: TDS is applicable only if the transaction value exceeds ₹50 lakhs.
• Payment: The buyer must deduct TDS at the time of payment to the seller (whether full or part payment) and remit it to the government.
• Mode of Payment: The TDS must be deposited online using Form 26QB within 30 days from the end of the month in which the payment is made.
• TDS Certificate: The buyer is required to issue a TDS certificate (Form 16B) to the seller within 15 days of filing the TDS return.

Example:

• Property purchase price: ₹70 lakh
• TDS rate: 1%
• TDS amount to be deducted: ₹70,000
• TDS deposit deadline: 30 days from the end of the month in which the payment is made.

2. TDS on Sale of Immovable Property

While TDS is primarily concerned with the buyer in the context of property transactions, sellers also need to be aware of the tax implications on the sale of property.

Capital Gains TaxIf the property is sold, the seller may be liable to pay capital gains tax depending on whether it is a short-term or long-term capital asset.

• Short-Term Capital Gain: If the property is sold within 2 years from the date of purchase, it is considered a short-term capital asset and taxed accordingly.
• Long-Term Capital Gain: If the property is sold after 2 years, it is treated as a long-term capital asset, which might be subject to lower tax rates and eligible for indexation benefits.

However, TDS on the sale is generally not applicable directly to the seller. The buyer handles the TDS responsibility.

3. Key Exemptions

TDS provisions under Section 194-IA do not apply in the following cases:

• The sale price of the immovable property is less than ₹50 lakhs.
• The property being purchased is agricultural land.
• The buyer is exempted from TDS, like in certain specific cases for government entities or certain exemptions granted by the Income Tax Department.

Summary of TDS on Sale/Purchase of Immovable Property