The Relationship between TDS and Purchasing Real Estate

TDS on Property

Taxes and purchasing property go hand in hand. As a rule, whenever a person purchases property, he has to deduct a certain amount of tax, and remit it to the Government. The government needed a better way to report property transactions, as well as buyers paying capital gains tax. To achieve this, the Government introduced Tax Deducted at Source (TDS).

Understanding TDS

Tax Deducted at Source is among the many ways that the Government can collect taxes from citizens in India. It is an important aspect when it com

es to purchasing land or a home. It is important that every person understands this term effectively.

The Income Tax Act of India describes TDS in the following manner – Certain persons in charge of making installments are obliged to deduct charges at source at prescribed rates.

TDS Examples

TDS instances regularly seen by citizens include rent, employee salary, sale of products or services, and any kind of payment for contractual or professional services. This amount is remitted to the Government. The TDS is calculated as per the income tax category. The amount is deducted every month from your account. Two factors that are taken into consideration are your income, and the Investment Declaration Form (IDF) submitted by you to your company.

TDS also makes process of paying taxes easier for business owners. The tax is deducted from the employee’s salary. If an employee has already paid his taxes, then there is no need for the company owner to deduct money from the employee’s salary.

TDS and Real Estate

TDS also plays an important role in the purchase of a home. The following points showcase its importance.

• ·         Currently, the TDS rate is at 1% on the value of the property, where the amount exceeds Rs. 50 lakhs.
• ·         The only exemption to this rule is land used for agricultural purposes.
• ·         If the sale amount is below Rs. 50 lakhs, then no deduction is made by the Government.

The limit of Rs 50 lakhs is not only the sale amount that is considered. Other ancillary charges that are considered include payments for:

• ·         Development charges
• ·         Parking space
• ·         Sewerage charges
• ·         Club membership (if the club is attached to the property)

What is the Procedure for Paying Tax Deducted at Source?

The following points need to be kept in mind when paying taxes via TDS:

The TDS sum has to be paid to the Central Government within a period of seven days from the end of the month in which the deduction was made.

• ·         It has to be accompanied by a receipt (challan) and a statement on Form 26QB.
• ·         The buyer has to provide a certificate of deduction of the tax on Form 16B to the seller.

Understanding tax deducted at source can help you decide whether to purchase land or a home. Ensuring that all the regulations laid down by the Indian Government will make your tax payment simpler and easier.