TDS on purchase of property is an indirect taxation system, which is levied on income obtained in different business dealings and financial commodities. For the purchase of property, the rules seem straightforward on paper: deduct 1% TDS when purchasing property worth ₹50 lakh or above. However, the devil lies in the details, and small oversights while filing or paying TDS on property purchase can snowball into significant financial and legal headaches.
Error 1: Not Knowing What TDS Will Be Deducted
There is a belief among a lot of buyers that TDS only kicks in after one acquires 50 lakh or more, but it is not true. The deduction of 1 percent is applicable to the full value of the sale in the case of property of 50 lakh and above. Here’s an example – when buying an apartment of ₹65 lakh, the TDS will be ₹65,000, not ₹15,000 on the surplus.
Moreover, buyers fail to recognize that TDS will be paid in installments on under-construction properties. Failing to meet this requirement on several payments may result in significant interest and fines.
Error 2: Neglecting the Residential Status of the Seller
Here is where many transactions are marred. The 1% TDS rate is applicable only in the case of a resident Indian seller. In case the transaction is with an NRI, the TDS rate is 12.5% plus surcharge and cess. So, never fail to check the passport of a seller and the number of days they have spent in India in a particular financial year to ascertain the right residential status.
Error 3: PAN and Documentation errors
It is remarkably easy to enter incorrect PAN details for either a buyer or a seller, which slows the TDS credit description on the seller’s Form 26AS and may initiate unwarranted disputes. If the seller fails to submit a valid PAN, TDS goes up to 20% rather than the standard 1%.
Error 4: Failure to meet Important Deadlines
The TDS has to be deposited within 30 days under Form 26QB, and Form 16B (TDS certificate) should be issued to the seller immediately. Late filing will be subject to 200 per day penalty, with non-deposit subject to an interest rate of 1.5 percent per month. These delays may appear insignificant, but when compounded, they may result in significant sums of money, particularly in the case of large-value transactions.
Error 5: BI Complications when Purchasing Jointly
In a collective purchase where there are many buyers and sellers, every buyer should deduct TDS from their seller. TDS cannot be performed by a single buyer on behalf of the parties —a common misunderstanding that leads to noncompliance and disagreements that may arise during property registration.
Error 6: Neglect of Add-On Costs
Most of the purchasers will not remember that TDS is on the aggregate consideration, which includes parking spaces, club memberships, and other facilities that may accompany the property. Leaving out these elements in the TDS calculation may result in under-deduction and fines.
Final Thoughts
It is not only a compliance matter but also a matter of ensuring that your investment does not get into any trouble in future. When planned properly, well documented and the common pitfalls are taken into account, the seemingly complicated requirement turns into a daily ritual of a completed property deal. That’s also why you should rely on trusted financial institutions like PNB Housing Finance, as they can guide you through such details.
Keep in mind that one can spend little money now to get advice from a professional and end up saving a lot of fines and legal wrangles in future. Whether it is your first property purchase or you are adding more to your property collection, these TDS nuances can make your property purchase process a pleasant experience without any legal issue arising.
