Sale of property: Tax Implications. Are you planning to sell your property anytime soon? Then, you must read this blog to know about the tax implications on the sale of property.
Sale of Property: Tax Implications
In India, sale of property is subject to Tax Deduction at Source, also known as TDS. Having said that, the buyer is required to deduct TDS at the time of sale of property.
Note 1:
TDS is applicable only if the seller is a Resident Indian.
Also Read: TDS on interest on securities Easily explained
Note 2:
If the payment is made by instalments, then deduction of TDS will be on each instalment paid.
TDS on Sale of Property: Threshold Limit
In order to deduct TDS on sale of property, the threshold limit for sale consideration is Rs. 50 lacs or above. Accordingly, if the sale value is below Rs. 50 lacs, then no TDS will be applicable.
TDS Rate:
The rate of TDS applicable on selling of property is 1% of the total sale consideration. And, the buyer is responsible for deducting this percentage before making the payment to the seller. This amount is then deposited with the government on behalf of the seller.
PAN Requirement
For TDS on property transactions, it is mandatory for both the buyer and the seller to possess a Permanent Account Number (PAN). The buyer must provide their PAN to the seller, and the seller must reciprocate. This requirement helps in the smooth processing and documentation of the TDS transaction.
Note:
If the buyer does not provide his PAN, then the TDS deduction rate will be 20% (instead of 1%)
| Particulars | TDS Rate |
|---|---|
| Seller has provided his PAN details | @1 % |
| Seller has not provided his PAN details | @20% |
Time of Deduction of TDS
The deduction of TDS on sale of property should be either at the time of credit of the sale consideration to the seller or at the time of actual payment, whichever event occurs earlier.
TDS Payments & Filing Form
The payment of TDS on selling of property is to be made by the buyer by filing the Form 26QB within 30 days from the end of the month in which TDS was deducted. Further, after depositing TDS to the government, the buyer has to furnish the TDS certificate in form 16B to the seller. This is available around 10-15 days after depositing the TDS.
Also Read: Comprehensive Guide on Consequences of non TDS Deduction Compliances
Exemptions
– No TDS is applicable if the total sale value of the property is below Rs. 50 lacs.
– There will be no deduction of TDS if the seller of property is a person other than Resident Indian.
– Lastly, No TDS is applicable if the property is an agricultural land
Illustration
| Name of Seller & Type | Name of Buyer & Type | Type of Property | Value of Property | PAN provided by Buyer | Applicability of TDS & Reasons |
|---|---|---|---|---|---|
| Ram, Resident Indian | Lakshman, Resident Indian | House Property | ₹55 lacs | Yes | Yes, TDS @1% will be applicable. Reason: Seller is a resident Indian. Value of property is above 50 lacs. And, buyer has provided PAN. |
| Sita, Resident Indian | Gita, Resident Indian | Agricultural Land | ₹1 crore | Yes | No, TDS will not be applicable. Reason: Property sold is an agricultural property. |
| Karan, Resident Indian | Arjun, Resident Indian | House Property | ₹45 lacs | Yes | No, TDS will not be applicable. Reason: Property value is below Rs. 50 lacs. |
| Steve, Non- Resident Indian | Mohan, Resident Indian | House Property | ₹2 crores | Yes | No, TDS will not be applicable. Reason: Seller is a Non- Resident Indian. |
| Raj, Resident Indian | Simran, Non-Resident Indian | House Property | ₹60 lacs | Yes | Yes, TDS @1% will be applicable. Reason: Seller is a resident Indian. Value of property is above 50 lacs. And, buyer has provided PAN. Further, status of buyer is irrelevant. |
| Virat, Resident Indian | Rohit, Resident Indian | House Property | ₹4 crores | No | Yes, TDS @20% will be applicable. Reason: Seller is a resident Indian. Value of property is above 50 lacs. And, buyer has not provided PAN. |
Conclusion
In conclusion, understanding TDS on the sale of property is crucial for both buyers and sellers to ensure compliance with tax laws. As tax regulations are subject to change, individuals involved in property transactions should stay informed and seek professional advice to navigate these complexities successfully.
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