Can I pay TDS on property in advance?

TDS means Tax Deducted at Source. All property buyers are required to deduct the TDS @1% on the payments made to the sellers towards the purchase of any property. There are many questions that come to the buyers’ mind such as what is the right time to pay TDS on property. Can we pay TDS on property in advance? Will it be a right decision to pay TDS in advance? Let’s have a look at this answer to resolve these queries.

The right time to deduct TDS is at the time of making payment. It also depends on whether you are paying in installments or the whole amount. If making any advance payment, tax should be deducted from it as well. 

Let us understand it with the help of an example. Suppose I have to pay an installment of Rs. 20,00,000 on March 15, 2021, can I pay TDS on property in advance on the whole price of the property? The answer is

I have to pay only 1% of the amount I am going to pay as installment. So, I will deduct Rs 20,000 only from the installment of Rs. 20,00,000. That means I will pay Rs. 19,80,000 to the seller.

The amount deducted from the payments made to the seller must be deposited as TDS within 30 days by the end of the next month. As per the example taken earlier, if I have deducted the amount on March 15, 2021, it must be deposited in the government treasury till April 30, 2021.

So, it is clear that the TDS is deducted at the time of the payment and it has to be deposited by the end of the next month.

Now the question is can I pay TDS on property in advance? It is not advisable to pay TDS in advance because due to any unforeseen reason, if the deal does not go through, it will result in a loss. So, it is advisable to pay TDS after the deal comes through.

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can we pay TDS on property before registration?

 It is not possible to pay Tax Deducted at Source (TDS) on property in advance. It is deducted by the buyer of the property at the time of making the payment to the seller. It is then deposited with the government on behalf of the seller.

Here's how the TDS process works for property transactions in India:

1. As per the Income Tax Act, 1961, the TDS rate is 1% of the property sale value if it exceeds ₹50 lakhs.

2. The buyer deducts it and deposits it with the government within a specified time frame. It is deposited using Form 26QB.

3. Once the TDS is deposited, the buyer is obligated to furnish form 16B certificate to the seller as TDS deduction proof.

4. The seller can claim credit for this TDS amount while filing the income tax.

So, the overall answer

to

can we pay TDS on property before registration is a clear no.

The sale of real estate in India is one of many transactions that are subject to tax deducted at source (TDS). As stated in Section 194-IA of the income tax code, TDS on the sale of property is applicable. But can TDS be paid in advance? 

If the property's worth is up to Rs 50 lakh, buyers and sellers do not need to worry about TDS consequences at all. TDS on property sale is applied to real estate transactions costing more than Rs 50 lakh. 

A buyer is required to withhold and deposit 1% of the transaction cost as TDS on the sale of property under Section 194-IA of the Income-Tax Act if the property's worth exceeds Rs 50 lakh. In the event that there is a discrepancy between the stamp duty value and the actual sale value of the property, Section 194-IA does not indicate which amount should be taken into account for calculating the TDS on property sale.

TDS on advance payment for property

If an advance is being paid before the conveyance deed is executed, the purchaser of the property must deduct the TDS either at the time the conveyance deed is executed or when the advance is paid. 

• Within 30 days at the end of the month in which the tax is so deducted, the buyer must deposit the TDS amount to the credit of the central government. 

• You must complete Form-cum-challan No. 26QB in order to provide further information and pay the TDS. 

• If there are many buyers or sellers for a property, a separate Form 26QB must be filled out for each group of buyers and sellers. 

• Each Form 26QB must include all buyers' and sellers' information.

I am a real estate investment advisor and I often get asked about TDS payment for property purchase. I always tell people that since buying and selling real estate is a highly typical transaction, sellers and buyers often wonder what the tax implications will be. Due to the high rate of tax evasion in this market segment, buyers are now required to deduct TDS at a rate of 1% when paying sellers. I will tell you more about it.

When to pay TDS on property? 

The buyer must deduct TDS at the rate of 1% if the sale consideration is 50 lakhs or more, but starting on April 1, 2022, TDS must also be deducted if the property's stamp duty value is 50 lakhs or more. This indicates that TDS must be withheld if the property's stamp duty value or the sale price exceeds ₹50,000. Except for agricultural land, TDS must be withheld from the sale price of all properties, including those that are residential, commercial, industrial, flat, building, or vacant sites.

Any "person" required by the income tax regulations to make a payment to a resident person to purchase a home or any other immovable property is required to withhold tax at the time of the transaction. If the payment amount is Rs. 50 lakh or higher, TDS of 1% must be subtracted. The term "person" is used broadly and can refer to a human, a company, a firm, a HUF, an association of people or a group of people, local governments, and any artificial juridical entity that does not fit under one of the aforementioned categories.

Amendment in Budget 2022

In Budget 2022, the government amended Section 194-IA to clarify that TDS must be withheld from payments made to or credits made to an individual, or from the stamp duty value (SDV) of such property, whichever is larger.

This change made the sale value used in TDS and capital gains computations equal. For instance, even if the seller only received Rs 48 lakh, TDS will now need to be taken off of Rs 54 lakh if the immovable property's SDV is Rs 54 lakh and its worth is Rs 48 lakh.

Can TDS on property be paid in advance?

Yes, it can be paid in advance but it is not advisable to do so.

A

dvance TDS payment is risky because you are then paying advance TDS even before shifting into the property and if something unforeseen happens and you will land yourself in a situation of extreme loss. So, I would suggest not making any advance TDS payment.

I hope this explains to you all about TDS payment for property purchase.

Hey there,

I purchased my dream house in 2021. Before that, I had only heard of TDS on purchase of property from a few friends and family. But at the time of making payment to my seller, I realised how important it is to understand the concept of TDS, especially to new real estate investors. I would like to commend Miss Surbhi for her excellent job in explaining TDS

on advance payment for purchase of property and when it is required to pay TDS. I would just like to add a few more points to what she has explained in her answer.

What is TDS and who deducts it?

The Indian government enacted a rule requiring the purchaser of a property to deduct tax at source when paying the seller for his property, in order to combat the widespread usage of unaccounted money in immovable property transactions. TDS, or tax deducted at source, was implemented with the goal of collecting tax at the source.

A person (deductor) who is liable to make a payment of a defined sort to another person (deductee) is required by law to deduct tax at source and deposit it to the central government's account. This effectively means that in property transactions, the home buyer would be responsible for deducting the TDS. From whose earnings the vendor makes a living. On the basis of Form 26AS or a TDS certificate provided by the buyer, the seller whose income has been taxed at source is entitled to a credit for the amount so deducted.

If the parties involved in the transaction fail to fulfil this obligation, they will be subject to a penalty. In reality, if the buyer fails to deduct the required TDS and report it to the authorities, he may face legal consequences.

When to deduct the TDS and how to pay it?

The TDS must be deducted by the property purchaser either at the time of executing the conveyance deed or at the time of payment of the advance, if any advance is made before the conveyance deed is executed. Within 30 days of the end of the month in which the tax is deducted, the buyer must deposit the TDS amount to the credit of the central government. You must fill out Form-cum-challan No 26QB to pay the TDS and provide additional information. If there are several buyers and/or sellers for a property, you must complete out a separate Form 26QB for each set of buyers and sellers.

I hope I was able to add a few more crucial points to Miss Surbhi’s response on TDS on purchase of property.