New Tax Rule Closes Loophole on Property Sales: How it Affects You
India's real estate market just got a bit more transparent for tax authorities, but this increased scrutiny can change the dynamics of property transactions.
TdsProperty SalesReal Estate MarketTax CollectionEvasionReal Estate NewsAug 02, 2024
For example, a ₹60 lakh property could be sold to a couple with each paying ₹30 lakh, or a couple could sell a property showing each received ₹30 lakh, effectively splitting the total transaction value. This scheme is about to end, as provisions of Budget 2024 will plug this loophole by considering the total sale consideration, not just individual payments.
As per the new rules, where there is more than one transferor or transferee in respect of an immovable property, then such consideration shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for the transfer of such immovable property. This means that the combined payments of all buyers will determine the TDS liability.
The move is expected to bolster tax collection and deter evasion in the real estate sector. However, there are nuances. NRIs and agricultural properties are exempt from the 1% TDS rule. Residents selling agricultural land are not subject to TDS. The 1% TDS is calculated on either the property sale value or the stamp duty value, whichever is higher.
PAN-Aadhar linkage is also important, as the IT department demands a 20% TDS if the seller's PAN is not linked to their Aadhar. Failure to pay TDS on property sales within 30 days from the end of the month in which the transaction occurred can result in a penalty of ₹200 per day until paid.
Additionally, the income tax department may impose the TDS amount as a penalty.
Frequently Asked Questions
What is the new tax rule on property sales?
The new tax rule requires the buyer to deduct 1% as tax deducted at source (TDS) on property sales exceeding ₹50 lakh, considering the total sale consideration, not just individual payments.
Who is exempt from the 1% TDS rule?
NRIs and residents selling agricultural land are exempt from the 1% TDS rule.
How is the 1% TDS calculated?
The 1% TDS is calculated on either the property sale value or the stamp duty value, whichever is higher.
What is the penalty for non-compliance?
Failure to pay TDS on property sales within 30 days from the end of the month in which the transaction occurred can result in a penalty of ₹200 per day until paid.
Why is PAN-Aadhar linkage important?
PAN-Aadhar linkage is important, as the IT department demands a 20% TDS if the seller's PAN is not linked to their Aadhar.
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