It is mandatory for a buyer to deduct TDS when he or she buys an immovable property of cost more than Rs. 50 Lakhs in India.
Immovable property means a building or part of a building or any land other than agricultural land.
Section 194-IA of the Income Tax Act from 1st June 2013 mandates the TDS Deduction obligation and you must know all about it before making payment to a seller.
Must know essentials to Deduct TDS on Property Sale
- Buyer deduct 1% TDS on total sale amount.
- TDS deducted if total sale price ≥ Rs 50 lakh.
- TDS deducted for each installment in case of payment in parts.
- Charges related to immovable property included in TDS calculation (e.g. club membership, parking, maintenance fees).
- Applies to properties bought on/after 1 Sep 2019.
- TDS must be deducted on the entire sale amount, even with multiple buyers/sellers.
- Example: House bought at Rs 55 lakh, TDS on Rs 59 lakh (55+2+1+1) @ 1%, TDS payable: Rs 59,000.
- No need for TAN; use PAN for payment.
- Buyer needs the seller’s PAN; else, TDS is 20%.
- TDS deducted during payment (including installments).
- Form 26QB for TDS payment within 30 days from deduction.
- Buyer gives Form 16B to seller post TDS deposit (10-15 days).
Mandatory to file Form 26QB
- Starting from June 1, 2013, purchasers of property are obligated to deduct a tax of 1% from the sale consideration amount in all relevant transactions.
- This deducted tax must be submitted to the Government Account using the e-tax Payment option (Netbanking) or authorized bank branches.
- Any amount taken out as tax under section 194-IA needs to be transferred to the Central Government’s credit within seven days from the close of the deduction month.
- Both the seller’s and purchaser’s PAN numbers must be provided in the online Form 26QB, which is essential for sharing property transaction details.
- The platform for sharing information about the immovable property sale and TDS payment is accessible through the website www.tin-nsdl.com (http://www.tin-nsdl.com/).
- The buyer of the property must issue a TDS certificate in Form 16B to the seller, confirming the tax deduction and its deposition into the Government Account.
- To acquire Form 16B, individuals can register on the Centralized Processing Cell (TDS) website or take assistance from our team.
Implications of Non/Late Filing of TDS Statements for Property Buyers and Sellers:
For Property Buyers:
- Default Consequences: Failure to file Form 26QB on time results in a fee as per Section 234E of the Act.
- Fee Amount: A fee of Rs. 200 per day will apply for each day of non/late filing.
- Additional Liabilities: The buyer may also face penalties for Late Deduction, Late Payment, and Interest. The Assessing Officer can impose a penalty under Section 271H.
For Property Sellers:
- TDS Credit Ineligibility: Non/late filing of Form 26QB by the seller leads to the inability to claim TDS Credit.
- Timely Deposit: Tax deducted must be paid to the Government Account through e-tax payment (Netbanking) or authorized bank branches. This should be done within seven days from the end of the deduction month (section 194-IA).
Penalties for Failure to File Form 26QB
For not deducting TDS:
1% per month, calculated from the due date of TDS deduction until the actual deduction date.
For not depositing TDS with the government:
1.5% per month, calculated from the TDS deduction date to the payment date to the government.
As a buyer, should I deduct TDS on the property value exceeding Rs 50 lakh, or on the total property purchase amount?
TDS must be deducted on the entire payment exceeding Rs 50 lakh. For instance, if the property costs Rs 70 lakh, TDS should apply to the full amount of Rs 70 lakh, not just the Rs 20 lakh exceeding the Rs 50 lakh limit.
As the property seller, how can I request a refund for the TDS that was withheld during the property sale?
A property seller can initiate the process of reclaiming TDS deductions on a real estate transaction by including it in their income tax return. If a situation arises where a refund is owed due to TDS on property sale, the reimbursement can be pursued by ITR Filing. For more such queries, feel free to consult our professional CA:
Stepwise Process to File TDS on Sale of Property
Fill in Challan 26QB:
- Go to the income tax portal and click on e-pay tax.
- Next click on New Payment and click on 26QB.
- Provide the details of the buyer and the seller, including PAN (Permanent Account Number) and contact information.
- Enter property details, payment details, and TDS amount.
- Generate the challan and verify the details.
Payment of TDS
- Make the TDS payment online through net banking or other electronic payment methods.
- After making the payment, you’ll receive a Challan Identification Number (CIN) or payment acknowledgment.
Form 16B
- After the payment is processed, the buyer (deductor) needs to request Form 16B on the TRACES portal.
- Enter the details of the property transaction and payment, including the acknowledgment number.
- Once verified, you can download Form 16B, which is the TDS certificate for the property seller.
Form 26QB Acknowledgment
- After successful payment, the buyer should provide the seller with a copy of the Form 26QB acknowledgment, which contains details of TDS payment.
Income Tax Return (ITR) Filing
- The seller should include the TDS details from Form 26QB while filing their income tax return.
- The buyer should also report the property purchase details in their ITR.
Moreover, If you want any other guidance relating to How to file TDS on Sale of Property Online, please feel free to talk to our business advisors at 8881-069-069.
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