real estate
Common people are often confused about the tax rules in real estate transactions. Recently, questions asked by readers have again brought this issue into discussion. Experts told when TDS and GST are applicable on brokerage and what is its process.
It is not necessary to deduct TDS on brokerage
Nowadays the role of broker has become important during the purchase and sale of property. In such a situation, a question arises in the minds of people whether tax is deducted on the brokerage given to the broker or not. According to tax expert Umesh Kumar Jethani, under Section 194H of the Income Tax Act, it is generally not necessary to deduct TDS on the brokerage given by a person to a broker.
However, this exemption is applicable only as long as the annual income or turnover of the person is within the prescribed limit. If a person’s business turnover exceeds Rs 1 crore or professional income exceeds Rs 50 lakh in the last financial year, then he comes under the purview of tax audit. In such cases, it becomes mandatory to deduct 2% TDS on the brokerage given to the broker, provided the amount given in a year exceeds Rs 20,000.
It is also necessary to give Form 16A to the broker
After deducting TDS, it has to be deposited with the government through challan number 281. For this it is necessary to take TAN number. Besides, it is also necessary to file Form 26Q every quarter and give Form 16A to the broker. On the other hand, there are clear rules regarding GST also. According to tax expert Shubham Aggarwal, if the annual brokerage income of a broker exceeds Rs 20 lakh, then it is mandatory for him to get GST registration. After registration, the broker has to charge 18% GST on his services and deposit it on time to the government.
Experts say that due to lack of knowledge of tax rules, people often make mistakes, due to which later they have to face penalties and notices. Therefore, before making a property deal, it is very important to understand the rules related to tax and if necessary, take advice from an expert.