Resale Property Purchase? Know Your TDS Obligations

Purchasing a resale property is an exciting milestone, but it comes with specific responsibilities, including adhering to tax obligations. One crucial aspect of this process is the deduction of Tax Deducted at Source (TDS) while paying the seller. This blog will help you understand the significance of TDS, how to pay it, and the steps involved in ensuring compliance.

Table of Contents

• TDS on the Purchase of Property
• TDS Deduction Important
• Steps for TDS Payment on Purchase of Property
• Download Form 26QB from TRACES
• Benefits of TDS Deduction and Payment
•  Final Checklist for Buyers

What is TDS on the Purchase of Property?

When buying an immovable property (excluding agricultural land) worth ₹50 lakh or more, the buyer must deduct TDS at the rate of 1% on the total sale value. This mandate comes under Section 194-IA of the Income Tax Act, 1961, and applies to both residential and commercial properties. The deducted TDS must then be deposited with the government.

Why is TDS Deduction Important?

The deduction and payment of TDS ensure compliance with tax laws, protecting both the buyer and seller from potential legal and financial issues. Here’s why it is crucial:

1. Avoid Penalties: Non-compliance can lead to penalties for the buyer.
2. Ease Seller’s Tax Filing: Proper deduction helps the seller claim tax credit during income tax filing.
3. Transparency: It fosters transparency in property transactions.

Suggested read: Home Loan for Land Purchase

Steps for TDS Payment on Purchase of Property

To ensure a seamless process, buyers must follow these steps:

1. Calculate the TDS Amount

The TDS is 1% of the total property sale value. For example, if the property costs ₹70 lakh, the TDS amount would be ₹70,000.

2. Use Form 26QB

TDS for property transactions must be deposited using Form 26QB, a challan-cum-statement for TDS on property purchases.

3. How to Pay TDS for Property

You can pay TDS both online and offline.

Online Payment

1.  Visit the e-filing portal​ https://www.incometax.gov.in/iec/foportal/
2.  Click on ‘e-Pay tax’, under ‘e-file’ and then click on ‘New Payment’
3.  Select “TDS on Property (Form 26QB).
4.  Provide buyer and seller PAN, property details, and transaction value.
5.  Make the payment using net banking or a debit card.

Offline Payment:

 Generate Form 26QB through the NSDL portal.

 Visit a designated bank to deposit the amount via challan.

4. Download Form 16B

After depositing the TDS, download Form 16B (TDS certificate) from the [TRACES portal](https://www.tdscpc.gov.in) and provide it to the seller as proof of compliance.

Suggested read: Buying Resale Flat

How to Download Form 26QB from TRACES

Form 26QB is a key document in the TDS payment process. Follow these steps to download it:

1. Log in to the [TRACES portal](https://www.tdscpc.gov.in).
2. Navigate to the “Downloads” section.
3. Select “Form 26QB” from the dropdown menu.
4. Provide the acknowledgment number and PAN details.
5. Download the form for your records.

Benefits of TDS Deduction and Payment

1. Legal Compliance: Ensures the transaction complies with tax laws, protecting both parties.
2. Ease of Tax Filing: Proper TDS deduction reflects in the seller’s Form 26AS, simplifying their tax return process.
3. Avoids Disputes: Transparent documentation reduces potential disagreements between buyer and seller.

Final Checklist for Buyers

1. Verify the property’s total sale value to determine if TDS is applicable.
2. Ensure both buyer and seller PAN details are correct.
3. Use Form 26QB to deposit the TDS and keep acknowledgment receipts.
4. Provide Form 16B to the seller as proof of TDS deduction.
5. Consult a tax professional if you face challenges during the process.

Buying a resale property is a significant financial decision, and adhering to tax obligations is critical. By understanding the importance of TDS deposit on purchase of property, ensuring proper compliance through TDS payment for purchase of property, and knowing how to download Form 26QB from TRACES, you can avoid legal complications and ensure a smooth transaction. Always stay informed and consult experts to handle any complexities effectively.

FAQs about Resale Property Purchase? Know Your TDS Obligations