Bought Property? Deposit TDS Or Get A Tax Notice

By | July 5, 2016

Get A Tax Notice

So you recently purchased a new property? Congratulations! Before you begin celebrating, remember to take care of all the financial aspects of your purchase. If your property was worth more than Rs. 50 lakh, did your tax get deducted at source?

Did you forget to pay TDS on the purchase of your property? Oh, no! Here’s some news you may not like. You might receive a tax notice and be asked to shell out as much as Rs. 1 lakh as a penalty.

You weren’t aware of this new-fangled rule, you complain?

Here’s the drill

First, let’s tell you that this rule has been in force since 1st June, 2013. But we’ll let you off the hook. Many property buyers are quite confused about paying TDS on their purchase.

Tell me more

How much do you pay?

If you buy property which has a value of more than Rs. 50 lakh, you should deduct 1% of the price before the money changes hands between you and the seller.

Deposit that 1% as TDS with the Income Tax department and submit Form 26QB.

Additional Reading: How To Save Tax On Long Term Capital Gains?

Confusing calculations?     

Remember that the 1% TDS amount has to be calculated taking into consideration the total sale price of your property.

Were you calculating the TDS on the amount exceeding Rs. 50 lakh? Recalculate, please.

Sale proceeds paid in installments?

Did you pay the sale proceeds in instalments? Yes, it is possible to do that. Then the TDS will have to be deducted when you make each payment.

What’s the deadline?

The TDS amounts deducted will have to be deposited with the Income Tax department not later than a week of the following month of making the payment to the seller.

Sounds complicated? Let’s give you an example.

If the sale proceeds were paid in the month of June, you have time until 7th July to pay the TDS to the Income Tax department.

Late to deposit TDS?

If you do not file TDS, you could incur a penalty of up to Rs. 1 lakh, along with late filing interest under Section 271H of the Income Tax Act.

Did you get an Income Tax notice?  

In case you received an Income Tax notice, you should pay the tax deducted at source immediately with the interest and late fee.

How is the interest calculated?

If the TDS has not been deducted, you will need to pay 1% interest under Section 201. In case the TDS has been deducted but you haven’t deposited the amount, you would have to pay 1.5% as interest.

The interest on the TDS amount is calculated from the date you made a payment to the seller.

Delayed the interest payment?

You will need to pay a late-filing fee of Rs. 200 per day under Section 234E of the Income Tax Act.

But wait, in case the seller has gone ahead and paid the taxes, you (the buyer) can submit Form 26A from your CA to the department. This way, the penalty charged under Section 234E will not be levied. However, you would need to pay the interest under Section 201.

Additional Reading: Which Are The Best Investments For The Next 10 Years?

Don’t want the seller to take credit for TDS?

There’s a way you can stop the seller from taking credit for paying the TDS to the Income Tax department. For this, you must remember to submit Form 16B.

Ready to sort out your tax payments? We hope so!

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About Dheeraj Kapoor

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