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TDS on Property Purchase: Rules, Rates & Exemptions

  • Writer: Aswalolla Praneeth
    Aswalolla Praneeth
  • May 13
  • 3 min read

tds-on-property-purchase-rules-rates-exemptions

TDS on Property

Purchasing a property in India involves several financial and legal obligations, one of which is the deduction of Tax Deducted at Source (TDS). TDS on property purchase ensures that the government collects tax at the source of income, thereby minimizing tax evasion. This comprehensive guide will walk you through the rules, rates, and exemptions related to TDS on property purchase in India.


What is TDS on Property Purchase?


TDS on property purchase refers to the tax deducted by the buyer while making the payment to the seller. The buyer must deduct TDS at the specified rate and deposit it with the government. This provision is applicable for properties priced above ₹50 lakhs as per Section 194IA of the Income Tax Act, 1961.


Rules for TDS on Property Purchase


  1. Applicability:

    • TDS applies to both residential and commercial properties priced above ₹50 lakhs.

    • It also applies to non-agricultural land.


  2. Buyer’s Responsibility:

    • The buyer is responsible for deducting TDS before making the payment to the seller.

    • TDS must be deposited within 30 days from the end of the month in which TDS is deducted.

  3. PAN Requirement:

    • The buyer and seller must provide their PAN details for TDS deduction.

    • If the seller does not provide a valid PAN, TDS will be deducted at a higher rate of 20%.

TDS Rates on Property Purchase in 2025


  • 1% of the total sale consideration is deducted as TDS on property purchase if the property value exceeds ₹50 lakhs.

  • For NRI sellers, the TDS rate varies based on the nature of the capital gain (short-term or long-term).

    • Short-term capital gains: 30%

    • Long-term capital gains: 20% plus surcharge and cess


Exemptions on TDS for Property Purchase


  1. Property Value Below ₹50 Lakhs:

    • No TDS is required if the property value is less than ₹50 lakhs.

  2. Agricultural Land:

    • TDS is not applicable for the purchase of agricultural land.

  3. Compulsory Acquisition of Property:

    • No TDS is required if the property is acquired through compulsory acquisition by the government.

  4. Government Transactions:

    • Properties purchased from the government or local authorities are exempted from TDS.

How to Calculate TDS on Property Purchase?


Example:If you are purchasing a property worth ₹75 lakhs, the TDS calculation will be:

  • TDS Rate: 1%

  • TDS Amount: ₹75,000 (1% of ₹75 lakhs)

  • The buyer must deduct ₹75,000 as TDS and pay the remaining amount to the seller.


Steps to Pay TDS on Property Purchase


  1. Visit the TIN NSDL website.

  2. Select Form 26QB for TDS payment.

  3. Fill in the required details, including PAN, property value, and TDS amount.

  4. Submit the form and make the payment online.

  5. Generate the TDS certificate (Form 16B) and provide it to the seller.


Consequences of Non-Payment of TDS


  • Penalty: The buyer may face a penalty for non-deduction or non-payment of TDS.

  • Interest Charges: Interest at the rate of 1% per month is levied for late deduction and 1.5% per month for late payment of TDS.

  • Disqualification of Property Transfer: Failure to pay TDS can lead to legal complications in property registration.


Why Choose Construction Managers?


At Construction Managers, we assist property buyers in managing all legal and tax-related obligations, including TDS on property purchase. Our expert team ensures timely payment of TDS, filing of Form 26QB, and issuance of TDS certificates, reducing the risk of penalties.


FAQs on TDS on Property Purchase


  1. What is the TDS rate on property purchase in 2025?

    • The TDS rate is 1% of the property value for properties above ₹50 lakhs.


  2. Is TDS applicable on agricultural land?

    • No, TDS is not applicable for agricultural land purchases.

  3. Can I claim a refund for excess TDS paid on property purchase?

    • Yes, the buyer can claim a TDS refund by filing their income tax return.

  4. What happens if TDS is not deducted on property purchase?

    • The buyer may face penalties, interest charges, and legal complications in property registration.

  5. How can I verify TDS payment status?

    • You can check the TDS payment status on the TRACES portal using Form 16B and Form 26QB.

  6. Is TDS applicable for NRI sellers?

    • Yes, for NRIs, the TDS rate varies based on capital gains: 30% for short-term and 20% for long-term.

  7. Can the seller pay TDS instead of the buyer?

    • No, it is the buyer’s responsibility to deduct and deposit TDS on property purchase.

  8. Can I pay TDS in installments?

    • No, TDS must be paid as a single transaction based on the total sale consideration.

 
 
 

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