Section 194IA of the Income Tax Act, 1961

As its name suggests, TDS is a tax that is payable by the buyer when they make any payment to the seller.

In the case of TDS on property sale, the government introduced it to check corrupt practices in transactions related to immovable properties.

Section 194IA of the Income Tax Act of 1961 mandates that the buyer has to deduct 1% of the transaction as TDS. However, this provision of TDS on the sale of immovable property is applicable only when the value of the property exceeds ₹50 Lakhs.

The following are the requirements that need to be fulfilled under Section 194IA of the Income Tax Act:

• The rate of TDS on the sale of the property is 1% of the total sale amount of the property.

• The TDS has to be deducted from the buyer and not the seller.

• If the property’s sale price is under ₹50 lakh, TDS is not required.

• The TDS on the sale of the property is also not applicable on agricultural lands.

• If the sale is carried out in several instalments, the TDS for the property sale will be deducted from each instalment.

• When a sale of the property is being carried out, all charges should be included in consideration for the value of the property. The TDS has to be paid on the entire sale amount. They may include:

  • Nature club membership fee

  • Car parking fee

  • Water or electricity facility fee

  • Maintenance fee

  • Advance fee 

• TDS applies even when multiple buyers or sellers are involved.

• The buyer can use PAN for payment and does not require TAN.

• The buyer must obtain the seller’s PAN, failing which TDS must be deducted at 20%.

• The deduction of TDS should take place at the time of credit or payment, whichever happens first.

• Form 26QB must be used to deposit TDS, and the payment should be made within 30 days from the end of the month in which the deduction occurs.

• The buyer must provide Form 16B to the seller after depositing TDS.

To file a TDS on the sale of a property, you just need to follow these simple steps:

• Step 1: Visit the Tax Information Network website of the Income Tax Department

• Step 2: Select the online services option

• Step 3: Now, go to the e-payment section

• Step 4: Choose Form 26QB under the sale of the property section

• Step 5: Click on the ‘TDS on Property Sale’ as challan

• Step 6: Enter details like PAN and contact details of buyer and seller, property information, amount of tax deposited

• Step 7: To complete the process, click on the submit button

• Step 8: You can print a copy of the challan for future reference

After successfully filing the TDS on the sale of the property, the buyer must get the TDS certificate in Form 16B. Here is how you can obtain it in a few easy steps:

• Step 1: Log in to the TRACES website 

• Step 2: Click on the ‘Form-16B (for the buyer)’ option in the download tab

• Step 3: Enter the PAN details of the seller and acknowledgment number details pertaining to the property transaction 

• Step 4: Click on the ‘Proceed’ button

• Step 5: Cross-check all the details once before clicking on the ‘Submit a request’ button

• Step 6: After your request is processed, click on the ‘Downloads’ tab 

• Step 7: Select ‘Requested Downloads’ from drop-down

• Step 8: The status of your Form 16B download request will be shown as ‘Available’

• Step 9: Download the ‘.zip file’ and open it with the date of birth of the deductor as a password
  

TDS is collected at the time income is paid. As selling a property creates taxable income, TDS must be deducted on such transactions.

In joint transactions, TDS rules remain unchanged. TDS must be deposited through Form 26QB within 30 days from the end of the month of deduction.