GST (Goods and Service tax)

the ministry of finance introduced GST in the 2017-18 budget.

The GST Act now requires that a developer or builder selling a property to a buyer must pay GST. This tax obligation is usually passed on to property buyers by builders.

Although GST is mandatory, you can avoid it if

A. the builder has got a completion certificate from the issuing authority

B. if you are constructing a residential property

C. Affordable Housing Scheme.

The new rules provide that GST will be applicable at 12.00% of the gross price/Total purchase price. If the builder opts for a composite scheme, the GST rate will be 5%

TDS on Property

The Finance Bill 2013 introduced Section 194-IA, which relates to Tax Deduction At Source on Property Transfers.

The Finance Bill 2013 stipulates that all sales transactions involving the transfer of immovable property with a consideration exceeding 50 lakh will be subject to a TDS (tax deducted from the transaction amount) by the buyer or transferee at the time they pay through any medium or credit.

Any authorized bank branch using NSDL’s e-Tax payment option will deposit taxes deducted into the Government Account.

A person who deducts TDS on Property does not have to have a PAN Number.

This provision applies to all transactions that were made after June 1, 2013. 

Tax deduction at source on the transfer of any immovable property exempts rural agricultural lands.

What is TDS on Property?

Transactions involving immovable property are often undervalued or not reported. Finance Minister introduced section 194IA, which requires a TDS of property at a rate of 1 per cent for properties whose transfer value exceeds 50,000. This was effective as of 1 June 2013.

Who is responsible for TDS in property transactions?

Tax deductions of around 1% are due to the buyer of the property. If A purchases a property valued at 50 lakh from A, A will be responsible for the TDS deduction of 1% (Rs. 50,000) and depositing the amount.

What are the steps to get a home loan from a Bank?

In this situation, the buyer/customer/borrower may instruct the bank to deduct 1% TDS of total sale consideration from the loan amount and ask to deposit the same with the government by them directly.

What are the required documents from the seller and buyer?

The buyer requires the transaction details and basic information of buyer and seller to provide copies of PAN for both buyers and sellers at the time of filling out Form 26QB.

For depositing TDS via offline method at authorized banks branches, you will need to complete Form 26QB and the bank challan.

What Procedure should I follow?

The buyer must deduct TDS amount at the time of payment to the seller, which must be deposited within one week.

First, the buyer must fill out the 26QB form. This will include all details about the property, TDS on the property calculation under Section 194IA, and the seller and buyer details.

Form 26QB asks the buyer to indicate the preference to deposit TDS on the property.

Online

After the buyer has chosen the online payment option, the 26QB will automatically be redirected to his e-payment gateway. Then, the buyer can choose the procedures that suit him best.

Offline

Alternatively, buyers can pay offline by printing the completed form and sending it along with the TDS amount to the authorized bank’s branches.

The buyer must submit Form 26QB and the TDS amount to the Centralized Processing Cell of TDS.