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  1. Tax Talk: TDS obligations of a buyer if house costs more than Rs 50 lakh

Tax Talk: TDS obligations of a buyer if house costs more than Rs 50 lakh

Buying a house is an exciting milestone in one’s life. While most individuals are aware of the tax benefits available for repayment of housing loan and the principal payment...

By: | Published: July 28, 2015 12:06 AM

Buying a house is an exciting milestone in one’s life. While most individuals are aware of the tax benefits available for repayment of housing loan and the principal payment, very few are aware of the tax deduction (TDS) obligation imposed on the buyer.

Obligation of buyer

The purchaser of an immovable property is required to withhold tax at the rate of 1% from the seller if the amount is more than Rs 50  lakh except where the property purchased is a rural agricultural land. Where the payment is made in multiple instalments, the taxes are required to be withheld from each instalment, where the total consideration is Rs 50 lakh or more. The 1% TDS rate is required to be applied on the total consideration, and not just on an amount exceeding Rs 50 lakh. The taxes deducted are required to be deposited into the government account within seven days from the end of the month in which the tax is deducted.

For instance, let us take the case of ‘X’ who purchases an apartment from a builder for Rs 75 lakh. The payment is required to be made in three instalments of Rs 25 lakh each in August 2015, December 2015 and March 2016. The total amount is higher than the threshold of Rs 50 lakh. ‘X’ is, therefore, required to withhold Rs 25,000 (1 % of amount due) from each of the instalments payable to the builder. The taxes withheld need to be paid to the government account on or before the seventh of the subsequent month, i.e., September 7, 2015, January 7, 2016, and April 7, 2016, respectively.

How to remit funds to govt

The buyer of the property has to furnish information regarding the transaction online on the TIN website (www.tin-nsdl.com). Once the details are submitted online in Form 26QB, the buyer can either make the payment online  immediately or subsequently through e-tax payment option or by visiting any of the authorised bank branches.

Does the buyer need a TAN?

The buyer is not required to apply for a tax deduction Account Number (TAN), the taxes need to be remitted by quoting the Permanent Account Number (PAN) of both the buyer as well as the seller.  The purchaser is required to generate a challan-cum-statement in Form No  26QB, which is the online form for furnishing information regarding the taxes withheld. The purchaser is also required to issue a tax withholding certificate in form 16B to the deductee (i.e., the seller of property). The buyer is required to download Form 16B from the website of Centralized Processing Cell, www.tdscpc.gov.in, and provide the same to the seller within 15 days from the due date for remittance of taxes.

Non-compliance

Where the buyer does not withhold the tax, he shall be liable to pay simple interest at 1% per month on the amount of tax from the date the same was deductible to the date on which tax is actually deducted. However, if the buyer has deducted the tax and has failed to remit the same within the due date, the interest rate applicable shall be 1.5% per month.

Delay in submission of Form 26QB would trigger a fee of Rs 200 per day for the period of delay, which shall be remitted by the purchaser before submission of the Form 26QB. The quantum of fee, however, shall not exceed the amount of taxes to be remitted. Delay in submission of Form 26QB beyond one year from the due date could attract penalty ranging from Rs 10,000 to Rs 1 lakh.

The writer is director,  Deloitte Haskins & Sells LLP

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