From the 1st June year 2013, if in case the buyer buys immovable property (a building or any part of building or land other than agricultural land) whose cost is more than Rs 50 lakhs, then he has to deduct (TDS) tax at source. This particular illustration upon TDS on sale of property has been laid down in Section 194-IA of Income Tax Act.
TDS on Sale of Property Requirements
Here are requirements of section 194IA:
- The buyer must deduct TDS at 1% of a total sale consideration. It has to be noted that a buyer requires deducting TDS, not a seller. The rate is 0.75% for the transaction carried out from 14th May 2020 to 31st March 2021.
- TDS is not needed to be deducted in case where sale consideration is less than Rs 50 lakhs. If a payment is made by instalments, then TDS has to be deducted as each instalment paid.
- The union budget 2019 has proposed the definition for “consideration for an immovable property” to include all the charges of nature of club membership fee, car parking fee, maintenance fee, electricity or water facility fee, advance fee or any other charges of any similar nature, which are incidental to transfer of an immovable property. It has been applicable for immovable property purchased after 1st September 2019.
- TDS must be paid on an entire sale amount. For instance, in case a person has bought a house at Rs 55lakh, then he requires paying TDS on Rs 55 lakh itself and not only on Rs 5 lakh. It will be applicable also even when there is more than one buyer or seller in the transaction.
- Post budget 2019 amendment made to section 194-IA, for example, if on 1st Sept 2019, a person have paid Rs 2 lakh towards parking fee, similarly Rs 1 lakh for water facility fee and also Rs 1 lakh for electricity fee, then sale consideration would becomes Rs 59 lakh (55 lakh +2 lakh+1 lakh+1 lakh), and a person will have to pay TDS on Rs 59 lakh @ 1%. Therefore, TDS payable would be Rs 59,000. In case a transaction is carried out from 14th May 2020 to 31st March 2021, the rate will be of 0.75%.
- The buyer of an immovable property need not obtain the TAN (Tax Deduction Account Number) for making payment of TDS on immovable property. The payment can be made by using the PAN card itself.
- For a purpose of making payment of TDS on an immovable property, a buyer has to obtain the PAN of a seller; else TDS will deduct at 20%. The PAN of a buyer is also mandatory for transaction. TDS is deducted at a time of making payment (including the instalment payments) or at the time of giving credit to seller, whichever is earlier.
- The TDS on an immovable property must be paid using Form 26QB within 30 days from the end of month in which the TDS was deducted. After depositing the TDS to government, the buyer is required to furnish TDS certificate in form 16B to seller. It is available around 10-15 days after depositing the TDS.
Penalties Applicable for non-filing of Form 26QB
| Interest | Calculation |
| Non-deduction of the TDS | 1% per month for a period from the date on which TDS is deductible and collectable to the date on which TDS and TCS is actually deducted. |
| Non-remittance of the TDS | 1.5% per month for a period from the date on which TDS is deducted to the actual date of payment. |
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Procedure for TDS on Sale of Property
The steps to pay the TDS through challan 26QB and to obtain Form 16B (for a seller) are as below:-
Step 1: Payment via Challan 26QB (Online and Offline)
- Click on to Form 26QB and select 0020 if one is a corporate payer or 0021 if one is a non-corporate payer. Fill in all necessary details. There will be two modes of payment at a bottom of the page- e-tax payment immediately (by net banking facility) and e-tax payment on the subsequent date (e-payment of taxes by visiting any of the nearest Bank branches). Choose any of them which you prefer, if online then click on to Proceed.
- On choosing net-banking, one will able to login and pay online. After payment is done, the bank will let you print the Challan 280 with a tick on 800 (i.e. payment of TDS on the sale of property). Take out the print for future reference.
- In case you cannot pay online, then an online receipt for the Form 26QB with a unique Acknowledgment Number is generated. This can be valid for 10 days after its generation. You can take it to your nearest bank for making an online payment. The bank will proceed with the payment and generate your challan.
Step 2: Register in TRACES
- If you are a first-time user, then register first on TRACES as the Taxpayer with the PAN[1] Card Number and with the registered Challan number.
- On registering, you can obtain approved Form 16B (the TDS certificate) and you can issue Form to Seller. Check the Form 26AS after seven days of payment. You can see that the payment is reflected in Part F under the “Details of Tax Deducted at Source on Sale of Immovable Property under section 194(IA) [For Buyer of Property]. Part F information is not available for claiming ITR (Income tax return) of the buyer.
- It provides you details like TDS certificate number (which TRACES generates), name and PAN of deductee, amount and transaction date, acknowledgement number (which is same as the one on the Form 26QB), date of deposit and the TDS deposited.
Step 3: Download the Form 16B
- After the payment in Form 26AS has been reflected, login to TRACES. Go to Download tab and click on to “Form-16B (for buyer)”.
- To finish the process, fill PAN of a seller and acknowledgement number details pertaining to the property transaction for which the Form-16B has been requested and click on to “Proceed”. Verify all details once and click on to “Submit request”.
- After a few hours, the request will be processed. Click on to Downloads tab and select the Requested Downloads from the drop-down menu
- You will be able to see that a status of your Form 16B download request is now available. If status says Submitted wait for few hours more before repeating a last step. Download the file. The password to open the file will be Date of Birth of Deductor (format is DDMMYYYY). Your form will be available inside the file. Take the print for future reference.
Mandatory Filing of Form 26QB
Section 194 IA of Income Tax Act, 1961 read with Rule 30, 31 & 31A of the Income Tax Rules states that:-
- Tax deducted must be deposited to Government Account by e-tax Payment option (Net-banking) or any nearby authorised bank branches. The sum so deducted under section 194-IA must required to be paid to the credit of Central Government within the period of 7 days from the end of month in which the deduction is made.
- PAN of seller, as well as of the Purchaser, must be mandatorily furnished in an online form (Form 26QB) for furnishing information regarding a property transaction. Facility for furnishing an information regarding transaction of sale of an immovable property and payment of TDS thereof is available on the website www.tin-nsdl.com
- TDS certificate in the Form 16B is required to be issued by Buyer of property to Seller, in respect of the taxes deducted and deposited into the Government’s Account. The Form 16B will be available for download by registering on to website of Centralized Processing Cell (TDS) www.tdscpc.gov.in
Conclusion
According to Finance Act of 2013, TDS will be applicable on transfer of immovable property, wherein a consideration of the property exceeds or is equal to Rs 50 Lakhs. For all transactions with effect from 1st June, 2013, Tax @ 1% has been deducted by purchaser of the property at a time of making payment for sale consideration.
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