Buying Property? This Small Mistake Could Serve You A Tax Notice
If you are buying property worth Rs 50 lakh or more, according to income tax rules you are liable to deduct a tax at source, or TDS, at the rate of 1 per cent from the payment to the seller.
It has to be deducted on the sale value of the property. The buyer has to then deposit this 1 per cent TDS with the government.
The rule is in place since June 2013 but only a few are aware of it, say tax experts. This ignorance has resulted in to many people getting tax notices, say tax experts. The tax is applicable on all types of properties, except agricultural land.
If the TDS has not been paid, the buyer would be considered an assesse in default. Also, an interest will be levied for the delay in payment.
“Interest would apply at the rate of 1.5 per cent per month if such TDS is not deposited with the government treasury on time,” said Parizad Sirwalla, national head of global mobility services, tax, KPMG.
Even if you are buying property that’s under-construction from a developer, you will have to deduct this tax.
If you have paid the money to the developer in installments, you will have to deduct the TDS from each installment. “If sale price exceeds 50 lakh in aggregate and is payable in instalments, the TDS in that case must be deducted from each instalment, irrespective of the size of the instalment,” said Ms Sirwalla.
The tax so deducted has to be deposited to the tax department within 30 days from the end of the months in which deduction is made.
You can also make an online payment through the tax department’s website. Go to the TCS section and click on the option ‘Online form for furnishing TDS on property’. Fill Form 26QB (challan-cum-statement for payment of TDS) and deposit the tax online through net banking.
Or, you can submit the Form 26QB online and pay the tax with authorised banks.
If the buyer fails to submit the Form 26QB or has submitted wrong information, the tax department may levy penalty between Rs 10,000 to Rs 1 Lakh.
“Delay in submitting the Form 26QB statement would entail a fee-charge of Rs 200 for every day during which the failure continues,” says Ms Parizad.
The buyer also has to provide Form16B (which certifies the deduction of TDS and used by seller while filing tax return) to the seller within 15 days of filing the Form 26QB.
“Failure to issue Form 16B or delay could also lead to penalty of Rs. 100 per day during which the failure continues,” says Ms Parizad.