A Costly Property Buying Mistake Every Buyer Must Avoid

If you are planning to buy a property, this is something you must clearly understand. Otherwise, in the future, you may face heavy tax demands, interest, and penalties.

Under the Income Tax law, when you purchase an immovable property worth more than ₹50 lakhs, you should not pay the full amount directly to the seller. The law requires you to deduct 1 percent of the sale consideration as TDS and remit that amount to the Income Tax Department on behalf of the seller. Only the balance amount should be paid to the seller.

The issue becomes even more serious when the seller is an NRI. In such cases, deducting just 1 percent is not enough. A much higher TDS rate may apply depending on the nature of the capital gains and other factors. If the buyer fails to deduct the correct TDS, the department may later recover the tax, along with interest and penalty, from the buyer.

Very often, these issues come to light only after several years, by which time the liability may become substantial.

The lesson is simple. Tax risks do not arise only when selling property. Even while buying property, strict tax rules must be followed carefully. A small mistake at the time of purchase can become a big financial burden later.