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TDS Laws Prescribed Under I-T Act on the Sale of Immovable Property

Video Transcription

Today we will talk about TDS laws prescribed under I-T Act on the sale of immovable property

In certain cases, when you buy an immovable property, you become liable to deduct tax under Income Tax laws.
When you buy an immovable property except for agricultural land from a Resident Indian for more than 50 lacs you become liable to deduct tax @ 1%.

For example: You buy property with sale value of Rs 80 lakh from Mr Anil and you decide to pay the sale consideration to Mr Anil in two instalments of Rs 40 lakh each. Even though the value of instalment is less than Rs 50 lakh, you still need to deduct 1% tax from the instalment since the total sale value of the property exceeds Rs 50 lakh. Hence, you need to deduct Rs 40 thousand from each instalment as TDS and pay the balance which is Rs 39,60,000 to the seller.

  • If you have taken a home loan to buy an immovable property, you need to deduct tax at the time of payment to the seller and not when paying your EMI to the bank.
  • In case of NRIs you need to deduct TDS on capital gains arising on sale of property and not on the sale value. However, for practical purposes buyers many times deduct TDS on the entire sale value and not on the capital gains since authentic information is not available for calculation.

Generally, TDS rate will be 20% for Long Term Gain & 30% for Short Term Gain. Surcharge and Education Cess will be additional if applicable.

For example:
You bought a piece of land from an NRI who made a short-term capital gain of Rs 10 lakh on the sale of the property. As a buyer, you will be responsible for deducting TDS @ 30% which is Rs 3 lakh. Suppose the seller had made a long term capital gain, the TDS should be deducted @ 20% which is Rs 2 lakh.

At H&R Block we have experts who will not only calculate accurate tax liability for you but also guide you in the complete compliance including the ones relating to remittance of money outside India for such transactions.

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