The buyer has to pay several taxes, and however while purchasing the property, the purchaser is liable to deduct and pay taxes. Section 194IA of the Income-tax act deals with the requirement of TDS deduction by the buyer when purchasing the property.
Requirements of section 194IA
From 1 June 2013, when a buyer purchases an immovable property (i.e. any land other than agricultural land or a building or part of a building) costing Rs 50 lakhs or more, he is liable to deduct tax at source (TDS) at the time of payment. The following things have been laid out in Section 194-IA:
- The purchaser is liable to deduct TDS @ 1% of the total sale value. Here, the purchaser is required to deduct TDS, not the seller.
- No TDS deduction is required if sale consideration is less than Rs 50 lakhs.
- If the payment is made in instalments, then TDS needs to be deducted on each instalment paid.
- ‘Consideration for immovable’ property should include all charges like a car parking fee, club membership fee, maintenance fee, electricity or water facility fee, advance fee or any other expenses of similar nature, which are related to the transfer of the property. This is applicable for property purchased on or after 1st September 2019 as per Budget 2019.
- TDS requires to be deducted on the whole sale value. For example, if you have purchased a property at Rs 55 lakh, you need to deduct TDS on the entire Rs 55 lakh and not on just Rs 5 lakh only. It is applicable even when there are more than one buyer or seller of a property. Post the budget 2019 amendment to section 194-IA, as in the above example, if on 10 September 2019, you have paid Rs 1 lakh for the water facility fee, Rs 1 lakh for electricity fee, and Rs 2 lakh towards parking fee, your sale consideration would be Rs 59 lakh (55+2+1+1). You need to pay TDS on Rs 59 lakh at 1%. The TDS payable would be Rs 59,000.
- Obtaining a TAN (Tax Deduction Account Number) is not necessary to pay the TDS on immovable property. You can pay TDS using your PAN.
- To pay TDS on immovable property, the buyer has to obtain the PAN of the seller; else, TDS would be deducted @ 20%. PAN of the buyer is also mandatory.
- TDS is deducted when payment is made (including instalment payments) or at the time of giving credit to the seller, whichever is earlier.
- The TDS must be paid using Form 26QB within 30 days from the month-end in which TDS was deducted.
- After depositing TDS to the govt., the buyer must furnish the TDS certificate in form 16B to the seller. It gets available around 10 to 15 days after depositing the TDS. The buyer needs to obtain Form 16B and issue the form to the seller.
Steps to pay TDS (challan 26QB) and how to obtain Form 16
Step 1: Payment through Challan 26QB (Online and Offline)
- Log on to tin.nsdl.com. Go to the ‘Services’ tab and choose ‘e-payment-Pay taxes online’. A new window will open as below:
- As highlighted above, click on the 'proceed' tab 'TDS on property (Form 26QB)'. A new window will appear as below:
- Select the code '0020' if you are a corporate taxpayer and '0021' if you are a non-corporate/Individual taxpayer. Details like Assessment year, type of payment, Financial year will be auto-populated.
- Fill in all other necessary details like – resident/non-resident, PAN of the buyer, PAN of the seller, full address of the transferee, transferor, the amount paid in figures and words, tax amount to be deposited, and complete address of the property etc.
- After filling in all the necessary details, the last tab is ‘payment info’. There are two modes of payment: e-tax payment on the subsequent date (e-payment of taxes by visiting any of the Bank branches) and e-tax payment immediately (through net banking facility). Choose one of your preferred options and click on the ‘Proceed’ button.
- If you choose net banking, login into your bank, and you can pay online. After TDS is paid, you can print "Challan 280" with a tick on 800 (i.e. payment of TDS on sale of the property). Print this challan out and keep it in records and safe.
- If you can't pay online, an online receipt for Form 26QB with a unique Acknowledgment Number is generated for you. This is valid for ten days after generation. You can take this to the authorized bank along with the cheque. The bank will process the online payment and generate the challan.
Step 2: Register in TRACES
- If the first-time user, register on the TRACES website as a Tax Payer with your PAN and the Challan number of the TDS payment.
- Once you register, you can obtain approved Form 16B (TDS certificate) and issue this Form to the Seller.
- Check your Form 26AS after seven days of making payment. Your payment will be reflected under “Details of Tax Deducted at Source on Sale of Immovable Property”.
- Part F consists of details such as TDS certificate number (which TRACES generates), transaction date and amount, name PAN of deductee, acknowledgement number (acknowledgement in your Form 26QB), date of deposit and amount of TDS deposited.
Step 3: Download Form 16B
- After the TDS payment in Form 26AS has been reflected, log in to TRACES. Go to the Download tab and click on “Form-16B (for the buyer)”.
- To proceed, fill PAN of the seller and acknowledgement number details and click on the “Proceed”.
- Now, verify all the details once and click on “Submit a request”.
- After a few hours, the download request will be processed. Go to the Downloads tab and choose Requested Downloads.
- You will see that the status of the Form 16B download request is ‘available‘.
- If the status is still ‘submitted‘, wait for a few hours more before checking again.
- Download the ‘.zip file’. The default password to open the ‘.zip file’ is the date of birth of the deductor (the format is DDMMYYYY). The form will be available inside the .zip file as a pdf. Download this.
Non-filing of Form 26QB
The IT department receives an Annual Information Return (AIR) from the registrar/sub-registrar office regarding the purchase and sale of property regularly. The department can determine if you have made a property transaction exceeding Rs.50 lakh from this report.
If the buyer has not deducted TCS at 1% of the transaction amount or has not filed TDS within the specified time limit, the IT department will issue an intimation/notice to the buyer.
Mandatory Filing of Form 26QB
As per the rules laid in Finance Act 2013, TDS is applicable on the transfer of immovable property, where the consideration of the immovable property is Rs 50 Lakhs or more.
Section 194 IA of the Income Tax Act, 1961, read with Rule 30, 31 & 31A of Income Tax Rules, states that:
- For all such transfers with effect from June 1, 2013, Tax at 1% should be deducted by the purchaser at the time of payment of sale consideration.
- The tax so deducted should be paid to the Government through the e-tax payment option (Net-banking) or any authorized bank branches.
- TDS deducted u/s 194-IA shall be required to be deposited to the Central Government within seven days from the end of the month in which the TDS is deducted.
- PAN of the seller and Purchaser should be mandatorily furnished in an online form (Form 26QB) for furnishing information regarding the property transaction. Facility for furnishing information regarding the sale of immovable property and TDS payment is available on (http://www.tin-nsdl.com/).
- TDS certificate in Form 16B needs to be issued by the Buyer of property to the Seller regarding the TDS deducted and deposited to the Govt.
- Form 16B will be available for download after registering on Centralized Processing Cell (TDS) (http://www.tdscpc.gov.in/).
Issuance of TDS Certificates in Form 16B
- All buyers must issue TDS certificates after generating and downloading the same from TRACES.
- TDS Reconciliation Analysis and Correction Enabling System (http://www.tdscpc.gov.in/).
- The Certificates downloaded only from TRACES Portal is valid.
Consequences Non/Late filing of TDS Statements
For Buyer of Property
- The buyer would be liable to pay a late fee of Rs. 200 (two hundred/per day for the period in which such failure continues.
- The buyer would be liable for defaults of Late Payment, Late Deduction and Interest thereon. Penalty u/s 271H can also be levied by the Assessing Officer.
- In case of default on the non/late filing of Form 26QB, a fee shall be levied u/s 234E of the Act.
For Seller of Property
- The TDS deducted should be deposited to the Govt. Account Any TDS so deducted u/s 194-IA shall be required to be paid to the credit of the Central Govt within seven days from the end of the month in which the TDS is deducted.
- In case of late or non-filing of Form 26QB, the seller will not be able to claim the TDS Credit.
Penalties Applicable on non-filing of Form 26QB
Non-deduction of TDS
1% per month for the period from the date on which TDS was deductible to the date on which TDS/TCS is actually deducted.
Non-remittance of TDS
1.5% per month for the period from the date on which TDS was deducted to the date of payment.
| Late filing fee:||Calculation|
| Late filing fee u/s 234E @ Rs 200 per day||In case of late or non-filing of Form 26QB, a penal fee is applicable u/s 234E. A late fee of Rs. 200 has to be paid per day for the period in which such failure continues. The buyer would be liable for defaults of late payment, late Deduction and interest thereon.|
|Penalty under section 271H||Assessing Officer may levy penalty u/s 271H at his discretion. It is applicable when a statement as required by the tax laws is not submitted timely. The penalty under this section must be more than Rs 10,000 and can extend to Rs 1lakh. However, no penalty shall be levied if TDS is deposited with a fee & interest and statement is submitted within one year of the prescribed time.|
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