TDS on Sale of Property


In Income Tax Act,1961, Section 1941A deals with the transfer of an immovable property where tax should be deducted by the transferee being a non resident of the property. It has also introduced TDS where the transfer of property can be done by a resident transferor. This comes under Section 194 LA Finance Act,2013. A person who buys a immovable property has to incur several taxes but the seller also has different tax liabilities and is also liable to pay TDS. Under Section 194- IA, any transferee who buys an immovable property other than agricultural land from the resident transferor in cheque, cash or any mode should deduct 1% of the total sum as income tax. 

TDS- Concept

TDS also known as Tax deducted at source came into being to collect tax from the income source. On the basis of the form 26 AS, the person who credits the amount to a different account is the deductor and someone whose account is credited with the amount is the deducted. So, when the deductor credits the income of the deductee, he should deduct tax from the source of income and remit that particular deducted income to the account. There is a TDS certificate issued by the deductor which contains the minimum amount or above upon whom the tax is deducted. Normally people whose income is above 30,000 or above is entitled to deduction of tax. 

Thus, the person who buys the proper is responsible to deduct the TDS amount and submit that to the government. The buyer gets liable for penalty due to failure to complete his duty. If the buyer failed to deduct the TDS amount, strict actions or penal actions can be taken against the buyer. 

The government has come up with a new law to check the use of unaccounted money as well as where the buyer can deduct the TDS and also make a payment to the seller for the property. 

TDS- Purchase of a Property

Under Section 194- IA of the Income Tax Act, any transferee who buys an immovable property other than agricultural land which includes residential property and commercial property from the resident transferor in cheque, cash or any mode should deduct 1% of the total sum as income tax. This section also says that a buyer has to deduct tax from the income at 1% interest only if the consideration amount or transaction value is equal to or above 50 lakhs. 

Besides all these, if we talk about an NRI who is willing to sell his property, in that case the rate of TDS is much higher. The government deducts TDS from them as well capital gains tax. 

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