While buying a house, one takes care of many things may be property documents, home loan EMI or an occupancy certificate, but a major responsibility which home buyers must perform is to deduct TDS (tax deducted at source) from the transaction amount on behalf of the income tax (I-T) department.
So let’s understand the details of TDS and how it is important for both buyer and seller:
TDS: What is it all about?
As per Finance Bill of 2013, TDS is applicable on sale of immovable property wherein the sale consideration of the property exceeds or is equal to Rs 50,00,000 (Rupees Fifty Lakhs). Sec 194 IA of the Income Tax Act, 1961 states that for all transactions with effect from June 1, 2013, Tax of 1% should be deducted by the purchaser of the property at the time of making payment of sale consideration.
However, TDS is not applicable if the seller is a non-resident India (NRI). In their case, TDS will be deducted under the provisions of Section 195.
Duties of buyer
- Deduct tax @ 1% from the sale consideration.
- Collect the Permanent Account Number (PAN) of the Seller and verify the same with the Original PAN card.
- PAN of the seller, as well as Purchaser, should be mandatorily furnished in the online Form for furnishing information regarding the sale transaction.
- Do not commit any error in quoting the PAN or other details in the online Form as there is no online mechanism for rectification of errors. For the purpose of rectification, you are required to contact Income Tax Department.
Responsibility of seller
- Provide your 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.
Lower or nil deduction of TDS
To reduce the hardships faced by the taxpayers, the government has introduced Section 197 which states that in case the total tax liability at the end of the person whose TDS is being deducted is less than the number of TDS that is being deducted, he may file an application to the Income Tax Officer to give him a certificate of Lower or nil deduction of TDS
But such provisions are not applicable on immovable property. In such cases, the buyer has to mandatorily deduct tax at source if it exceeds Rs 50 lakhs, in respect of each set of buyer and seller.
It is an important duty of both buyer and seller to file TDS at right time. If one fails to do this, then they have to bear the consequences too. A failure within the due time period can lead to interest, penalty and rigorous imprisonment of up to seven years.
On the other hand, a seller will have to pay the dues to the government in a buyer fails to deduct TDS. However hard penalties are not applicable to them.