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Tds - when to pay - during construction payments or at end?

22 March 2016

I had one question on TDS on Property - while buying from Builder a under construction property - Do we need to pay TDS for each installment of property under construction?Or we can pay it one time at the time of Registering property?

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14 Replies

CMA Poornima Madhava (CMA) (13112 Points)
Replied 22 March 2016

If you are the purchaser of the property, then you don't pay TDS (to the builder) but deduct from payment to the builder (and then pay to the govt) @ 1%. However, if the value of the property or payment/credit is less than 50 lacs, then no need to deduct tax at source (TDS). But if the value of the property is >=50 lacs or payment/credit is >=50 lacs, then you need to deduct at source (from builder and pay to the govt).

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Harshvardhan vaidya (34 Points)
Replied 22 March 2016

Thanks Poornima - on the same line assuming I have gone into agreement with builder for flat purchase of a under construction property in say Jan 2015.. And since then on regular intervals been paying to the demand note raised by builder. Not the specifics I was looking was - should I be paying TDS to govt with each payment made to builder ? Or I can pay TDS to govt at the end while I go for sale deed/ registration?

CMA Poornima Madhava (CMA) (13112 Points)
Replied 22 March 2016

Is the sale consideration (agreed price for the property) >= 50 lacs?
If yes, then in case of installment system of payment, TDS is required to be deducted on all such installments individually but only on principal portion and not on the interest or penalty portion.

CMA Poornima Madhava (CMA) (13112 Points)
Replied 22 March 2016

For more details: https://goo.gl/tZw80L

Harshvardhan vaidya (34 Points)
Replied 23 March 2016

1.Is the sale consideration (agreed price for the property) >= 50 lacs?
-- How can we conclude this - In my case the agreement mentioned as below

...the purchaser approached the Vendors/Developer and expressed his desire to purchase Schedule "B"Property, which has fallen to the share of the developer for a sale consideration of Undivided share Rs. 30,00,000.00/- (Rupees Thirty One Lakh Ninety One Thousand Five Hundred and Twenty only) and construction cost Rs. 40,00,000.00/- (Rupees Forty Seven Lakh Eighty Seven Thousand Two Hundred and Eighty only) which includes the Car Parking, BESCOM deposits, cost towards the amenities and existing VAT....

So in this case what can be considered as Sale consideration - 30L or 70L - and on which amount will the TDS be applicable.

Few notes : Builder is going to register property on value of 30L, Bank has approved loan on 10% of total amount (i.e 80% of 70L)

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CMA Poornima Madhava (CMA) (13112 Points)
Replied 23 March 2016

As per agreement, consideration is 70 lacs. Though value to be registered is less than the consideration actually paid/payable (by cheque/draft/online-transfer), you need to deduct tax at source on the consideration value i.e. 70 lacs as and when the instalment is paid, as per provisions of Act.
If you have not deducted tax at source so far, you can deduct on the total value when you make next payment to the builder/developer and pay the same to the govt within due date
For delay in deduction of tax, you can take a defensive stand saying that the consideration did not exceed the limit when initial payments were made (though this is not completely right, yet can be used for the sake of defence)

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Harshvardhan vaidya (34 Points)
Replied 23 March 2016

Hi Poornima - Thanks you very much this helps a lot - i have spent last two weeks on getting this cleared... the answer you have given is very crisp and to the point I was looking for.

Ramnathan Kalyanam (2 Points)
Replied 29 March 2018

Hi I have booked and apartment under construction and total value is Rs 1.1 Cr. I have to make payments based on progress and demad letter of builder. In FY 2016-17 the demand was Rs 30 L , FY 2017-18 it was 45 L. wheter TDS is required as the demand /payments is less than thresold level of Rs 50 L per year?

Thanks

Praveen Gaur (2 Points)
Replied 24 July 2018

Hello If I didn't pay TDS at all then how much is the penalty and is there any cap on the penalty amount?

Raj (ABC) (84 Points)
Replied 09 September 2019

Hello Experts, Please help to resolve my TDS queries - My Apartment Booked in 2013 as construction linked plan and at that time, Agreed cost was less than 50 Lacs but at the time of FDN (Apr-17), builder increased cost in terms of area (though it was not increased), so it crossed 50 Lacs, but Registry is not yet done and after more than 2 years of followed-up, builder now refunded 1% TDS on total amount paid to builder. So, I have few queries here - 1. What is my purchased date here - a) Date on which Apartment Booked, OR b) Date on which Registry will be done? 2. What does sale consideration amount means - a) does sale consideration means, value will be written on Registry OR payment I paid to Builder? b) does Sale consideration include Service Tax I paid to Builder? c) does TDS calculates on sales consideration that includes service tax? d) Bcoz circle rate is increased, so stamp duty and value which will be written on property will be more than paid to builder. So if Sale consideration means value will be written on Registry (on which stamp duty is calculated) then TDS will be on current Registry value OR Registry value on which apartment booked

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Raj (ABC) (84 Points)
Replied 12 September 2019

Dear Experts, Please share your viewpoint.

Govinda Balan Kalyana Sundaram (2 Points)
Replied 10 April 2023

CMA Poornima Madhava, If there are 2 Agreements that are executed for the purchase of a building under construction. For example:

1. For purchase of undivided portion of land (INR A < 50 lakh)

2. For construction of apartment over that land (INR B < 50 lakh)

However, A+B is more than 50 lakh. The individual stamp duty values are less than 50 lakh, In this case, do we need to pay TDS on the considered value?

rajbir singh (2 Points)
Replied 29 April 2023

Dear Govind Balan Sir,

1. If Total consideration of any immovable property is more than 50L then TDS need to deduct @ 1%

2. No deduction if "immovable property and the stamp duty value of such property, are both" less than fifty lakh rupees.

3. "immovable property" means any land (other than agricultural land) or any building or part of a building;

Due to above view you need to to deduct TDS on above transaction.

Narasimhan S (2 Points)
Replied 15 June 2024

Hi, I am Narasimhan. I bought an under-construction apartment in March 2019 and registered the sale deed in October 2019 for full consideration value of Rs 73 lakhs payable in instalments. I have been deducting tds and filing 26QB for all past instalments. However, later due to some Scheme Offers, the Builders later, credited home loan interest on part of the consideration value, thus bringing down the total amount to Rs 67 lakhs. In view of this, I filed 26QB showing the payment as the last instalment for the balance amount and mentioned Stamp Duty Value as Rs 73 lakhs only. Queries: 1. What is the Stamp Duty Value to be mentioned now? 2. Can I deduct TDS @ 1% of the amount of last instalment or should I have deducted on the total of originally registered consideration value? 3. Will the IT Dept/AO question for short-deduction of tds against the full registered consideration value? There is no in built provision in form 26QB for justification. 4. Do I need to Correct 26QB? Shall be grateful for your guidance.