Property + Real Estate Tax

Key decisions

1. Q1

   Section 194-IA — when does 1% TDS apply?

   Buyer's obligation: 1% TDS on FULL consideration if property value > ₹50L. Pay via Form 26QB online within 30 days of payment. Generate Form 16B as TDS certificate to give seller. Common mistakes: (a) buyer thinks ₹50L threshold applies to their share in joint purchases — NO, it's on TOTAL property value (₹60L joint property = ₹60K TDS even if you only paid ₹30L); (b) deducting from each instalment instead of full — Sec 194-IA applies on each payment to seller. NRI seller: TDS goes to 20% (LTCG) / 30% (STCG) u/s 195.

2. Q2

   How do I calculate LTCG on property sale with indexation?

   Held > 24 months = LTCG. LTCG = Sale - (Indexed cost + Indexed improvement + transfer expenses). Indexed cost = Original × CII current / CII purchase year. CII 2025-26 = 363. Example: bought ₹50L in FY 2014-15 (CII 240), sold ₹1.2Cr in FY 2025-26. Indexed cost = ₹50L × 363/240 = ₹75.6L. LTCG = ₹44.4L. Tax = 12.5% × ₹44.4L = ₹5.55L (post July 2024; was 20% with indexation before). Budget 2024 lets you ELECT either old regime (20% with indexation) or new (12.5% without) — whichever lower.

3. Q3

   Section 54 / 54F / 54EC exemptions — when each?

   Sec 54: exemption if sell residential AND buy/construct another residential within 1 year before or 2 years after (construct in 3 years). Exemption = lower of (cap gain) or (new property cost). Max ₹10Cr cap (Budget 2023). Sec 54F: exemption if sell NON-residential (gold, MF, shares, land) AND buy residential. Conditions like 54 but exemption only if ENTIRE proceeds reinvested. Sec 54EC: invest LTCG (max ₹50L/yr) in NHAI/REC/PFC bonds within 6 months — 5-yr lock-in, ~5.25% interest, fully exempt.

4. Q4

   Section 24(b) home loan interest — ₹2L cap or more?

   Sec 24(b): up to ₹2L deduction/FY on home loan INTEREST for SELF-OCCUPIED property. NO cap if LET OUT (rented) — full interest deductible against rental income, even creating a loss (carries forward 8 years). Sec 80EE: additional ₹50K for first-time buyers (loan ≤ ₹35L, property ≤ ₹50L, sanctioned Apr 2016-Mar 2017). Sec 80EEA: ₹1.5L additional first-time buyer (sanctioned Apr 2019-Mar 2022, stamp ≤ ₹45L). All 3 old-regime only.

5. Q5

   Buying property from NRI seller — TDS at 20%?

   YES — Section 195 applies (NOT 194-IA which is for resident sellers). Buyer must deduct 20%-30% TDS on FULL consideration: LTCG NRI seller (>24 months) = 20% + surcharge + cess. STCG NRI seller = 30% + surcharge + cess. Buyer needs TAN (apply via Form 49B, 5-7 days). Deposit via Form 26QC. NRI can apply for lower TDS via Form 13 to AO — reduces to 1-3% of capital gain (not consideration). For ₹1Cr property purchase from NRI without Form 13, buyer ends up depositing ₹20L+ TDS (massive working capital hit). Always insist on Form 13.