• 1% TDS deduction by buyer

I am buying an under-constructed property from Builder and I have taken a bank loan for that. The payment will be made in installments as the construction progresses. So, when slab "x" will be constructed, then builder will send Demand letter to bank and Bank will prepare the cheque and give amount to builder.

As per my understanding, as a buyer, I have to deduct 1% TDS for every installment Bank is paying to Builder. But, bank is saying that they will pay the complete amount asked in the "Demand letter" and they will not get involved in TDS. 

- How can I still deduct TDS from each installment that bank pays to builder? Can Seller write in "Demand letter" that 1% will be deducted for TDS and ask final amount from Bank after deduction? 

- Is there a way I can pay complete TDS in one go (instead of installments) before bank starts making payment to the builder? And then deduct TDS at the end or during possession?

- Do I also need to deduct TDS from Token amount and Downpayment? I paid token amount few months back and I did not know about paying and deducting TDS for it. If I pay TDS to govt now for the amount already paid to Builder, how can I deduct TDS from builder? should I ask builder for refund or should I deduct in next installment?
Asked 21 days ago in Property Tax

Hi

 

1. Yes, the demand letter can mention the gross amount, TDS and net payable amount.

2. If not mentioned, you can do reverse calculation and pay TDS accordingly and adjust TDS paid with the final payment.

3. TDS is to be paid as and when payments are made to the seller.

4. Yes, TDS was to be paid. You can do reverse calculation and pay now with interest. Adjust the same with future/ final installments.

 

Lakshita Bhandari
CA, Mumbai
5572 Answers
661 Consultations

5.0 on 5.0

TDS is applicable if the value of the property is Rs. 50 lacs or more. Rate of TDS is 1%. Tax shall be deducted at the time of payment. Sale consideration includes charges of the nature of club membership fee, car parking fee, electricity or water facility fess, maintenance fee, advance fee or any other charges of similar nature which are incidental to transfer of the immovable property.  For each payment of TDS, you have to file Form 26QB. 

 

Deduct the TDS in one installment, either adjust the amount in the installment or take refund from the builder. Notify the builder before making payment of TDS, file form 26QB and share copy of challan along with the TDS certificate with the builder. For previous payments, pay interest on the tax amount.

 

For detailed discussion, you may consult telephonically and also I can assist you in filing of Form 26QB.

Vivek Kumar Arora
CA, Delhi
4243 Answers
408 Consultations

5.0 on 5.0

1. If you pay in one installment then there would not be any problem.

2. Inform the builder for TDS deduction and ask him to reduce the amount in the demand letter. Also intimate the bank before releasing payment to the builder.

Vivek Kumar Arora
CA, Delhi
4243 Answers
408 Consultations

5.0 on 5.0

1. Interest would be applicable in such case.

2. It is always advisable to adjust the TDS amount in the last installment to be paid to the builder.

Lakshita Bhandari
CA, Mumbai
5572 Answers
661 Consultations

5.0 on 5.0

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