The Indian government uses Tax Deducted at Source (TDS) to collect taxes from individuals at the point of earning. It calls for the deductor (in this example, the buyer) to withhold a specific portion of the transaction's value as tax and send it to the government on the deductee's (the seller's) behalf. TDS on the property sale is applied to secure the collection of taxes on these transactions. Specific TDS criteria and processes must be followed when joint sellers are engaged in the property transaction.
Understanding Joint Sellers
The term "joint sellers" refers to a group of people who jointly own the property and wish to sell it. They might be co-owners, relatives, or other people or organisations with a stake in the property. Joint sellers concur to sell the property collectively and divide the sales revenue following their individual ownership stakes.
TDS Applicability on Sale of Property
Section 194-IA of the Income Tax Act 1961 governs TDS on property sale. According to this provision, TDS is required when the purchase price of real estate exceeds Rs. 50 lakhs. The buyer must take TDS out of the total when paying the vendor.
TDS Rate on Sale of Property for Joint Sellers
For joint sellers, the TDS rate on the sale of real estate is 1% of the entire consideration sum. No matter how many sellers are engaged in the transaction, this rate applies to everything. The buyer is required to withhold TDS at 1% of the total consideration if it is greater than Rs. 50 lakhs and pay it to the government.
PAN and TAN Requirements
Buyers and sellers must have valid Permanent Account Numbers (PAN) to complete the TDS procedure. The buyer must ensure they have all joint sellers' PAN information before deducting TDS. TDS on property sales is lodged under the buyer's PAN, eliminating the need for a Tax Deduction and Collection Account Number (TAN).
TDS Deduction and Deposit
Before paying the joint sellers, the buyer is responsible for subtracting TDS from the total consideration amount. The TDS amount is subtracted from the total consideration amount over Rs.50 lakhs at a rate of 1%. Within 30 days at the end of the month when the TDS was deducted, the amount of TDS that was withheld must be transferred to the government's account using Form 26QB.
Filing of TDS Return
After deducting and submitting TDS, the buyer must submit a TDS report using Form 26QB on the government's TRACES (TDS Reconciliation Analysis and Correction Enabling System) site. The TDS return must be submitted within 30 days following the end of the quarter in which the TDS was deducted. To file a return, you must include information about the transaction, the TDS taken, and the PANs of the joint sellers.
Claiming TDS Credit
The joint sellers may claim a credit for the TDS deducted when filing their income tax returns after filing the TDS return and paying the TDS amount to the government. The buyer's TDS deduction is seen as a tax that has already been paid on their behalf.
Conclusion
TDS is mandatory for property sales exceeding Rs.50 lakhs, with the buyer responsible for withholding and filing the tax. Joint sellers must have a valid PAN for the TDS procedure. The buyer must deposit the TDS amount to the government's account and file the return using Form 26QB. Enabling joint sellers to claim credit for deducted TDS ensures compliance with Income Tax Act TDS provisions.
