TDS on Sale of Property: What You Need to Know

 When selling a property in India, one of the key considerations for both buyers and sellers is Tax Deducted at Source (TDS). Introduced to ensure tax compliance, TDS is applicable to most property transactions and varies based on the seller’s residency status. This article outlines the essentials of TDS on property sales.

1. What is TDS on Sale of Property?

TDS refers to the tax amount that the buyer deducts from the transaction value and deposits with the government on behalf of the seller. This deduction ensures that taxes are collected at the source of income.

2. Applicability of TDS

  • For Resident Sellers: TDS on sale of property applies if the property’s sale value exceeds ₹50 lakh. The rate is 1% of the transaction value.
  • For Non-Resident Indian (NRI) Sellers: TDS is deducted at higher rates—20% for long-term capital gains and 30% for short-term capital gains—irrespective of the transaction value.

3. Buyer's Responsibility

The buyer is responsible for:

  1. Deducting TDS at the time of payment to the seller.
  2. Depositing the TDS with the government within the specified timeframe using Form 26QB for residents or the applicable form for NRIs.
  3. Providing a TDS certificate (Form 16 or Form 16A) to the seller as proof of deduction.

Failure to comply can result in penalties and interest charges.

4. TDS Calculation

  • For resident sellers, TDS is calculated on the total sale value.
  • For NRIs, it’s calculated on the capital gains. In cases where a lower tax liability is anticipated, NRIs can apply for a lower TDS certificate from the Income Tax Department.

5. TDS Exemptions and Refunds

Certain exemptions may apply:

  • If the seller reinvests long-term capital gains in specified bonds under Section 54EC or in a new residential property under Section 54, the tax liability can be reduced. However, TDS must still be deducted upfront.
  • If the deducted TDS exceeds the seller's final tax liability, the excess can be claimed as a refund by filing an income tax return.

6. Documentation for TDS Compliance

To ensure smooth processing, buyers and sellers must maintain proper documentation, including:

  • Sale agreement and deed.
  • PAN details of both parties.
  • TDS payment receipts and Form 16/16A.

Conclusion

TDS on the sale of property is a crucial compliance requirement that impacts both buyers and sellers. Staying informed about the applicable rates, exemptions, and filing processes ensures smooth transactions. For professional assistance with TDS compliance and property taxation, contact Dinesh Aarjav & Associates, your trusted partner in tax and legal advisory services.

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