If you bought property but have not deposited TDS, you may get a tax notice

If you bought property worth more than Rs 50 lakh and did not deduct tax at source (TDS) or failed to deposit the amount with the income tax department on time, you may have to pay a penalty of up to Rs 1 lakh.

Several taxpayers recently received notices from the department for no t doing so. Anyone

buying real estate worth more than Rs 50 lakh has to deduct 1% of the price of the property

before paying the seller. That 1% TDS has to be deposited with the tax department using

Form 26QB.

“The income tax department recently matched the TDS data with the data they

received from the property registrar for property transactions over `50 lakh.

Wherever there was a discrepancy, either the buyers failed to deduct or deposit

the TDS, a notice has been sent,” .

While the rule has been in effect since June 1, 2013, many buyers are unaware

or often confused about how to calculate the tax. TDS has to be calculated on

the total sale price and not the amount exceeding Rs 50 lakh.

“Sometimes total sale price, which exceeds `50 lakh in aggregate, may be

payable in instalments. The TDS in that case must be deducted from each

instalment no matter how small the instalment is. Most people fail to do that,”


In case the payment is made in instalments, then TDS needs to be deducted at

the time of making each payment. This TDS, deducted each time while paying

the instalment, is to be deposited with the department by way of return cum

challan (Form 26QB) within seven days of the following month of making the

payment. Failing to do so can, apart from the dues and late filing interest,

attract a penalty under Section 271H of up to Rs 1 lakh.

For those who have received a notice, the immediate corrective step to avoid

paying a penalty is to pay the TDS along with the applicable interest and late

filing fee. The interest payable under Section 201 is 1% per month if tax wasn’t deducted

and 1.5% in case this was done but not paid.