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
“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.