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TDS, which stands for Tax Deducted at Source, is applicable on the sale of immovable properties like a house or building. This TDS on sale of property in India comes under Section 194IA of the Income Tax Act, 1961. Mentioned below are details about the rate of TDS on sale of property and a deeper dive into TDS on sale of property section.

What is the Rate of TDS on Sale of Property?

The rate of TDS on sale of property in India is at 1% of the transaction value if the total value is more than ₹50 lakh. This rate of TDS on sale of property in India is applicable on the sale of all immovable properties like a house, land, building, etc. except on the sale of agricultural land.

However, you should note that the 1% rate is only applicable if the seller is a resident of India. If the seller is non-resident or NRI, the rate of TDS on sale of property changes. For a non resident, the TDS rate is 20% + surcharge + cess. TDS for NRI will be levied even if the transaction value of the property is less than ₹50 lakh.

Understanding the Requirements of Section 194IA

The TDS on sale of property in India and its requirements have been mentioned under Section 194IA of the Income Tax Act, 1961. Here is a look at the same:

  • The TDS rate is at 1% of the total sale amount which the buyer has to deduct and not the seller.

  • If the total sale consideration amount is less than the set limit of ₹50 lakh, no TDS is required to be deducted.

  • If the sale payment is done in instalments, the TDS will have to be deducted on each instalment that will be paid.

  • All charges like nature club membership fee, car parking fee, water or electricity facility fee, maintenance fee, advance fee, etc. should be included in consideration for the property. This condition applies to the immovable property purchased on or after September 1, 2019.

  • The TDS has to be paid on the entire sale amount. This condition is applicable even when there is more than 1 buyer or seller involved. After the budget 2019 amendment to Section 194IA of Income Tax Act, 1961, if on September 1, 2019, you have bought a house for ₹55 lakh, paid ₹3 lakh for parking fees, ₹1 lakh for water facility and ₹1 lakh for electricity, your sale consideration will be ₹60 lakh. You will have to pay TDS on ₹60 lakh at 1%, which would be ₹60,000. In case the transaction is done between May 14, 2020, to March 31, 2021, the rate is 0.75%.

  • The immovable property buyer does not require a TAN (Tax Deduction Account Number) to pay the TDS for real estate. The payment can be made with the PAN.

  • The buyer has to obtain the PAN of the seller for making the TDS payment on immovable property, otherwise, the deducted TDS is at 20%. Having PAN of the buyer is also compulsory.

  • The TDS is either deducted at the time of payment, including payments done in instalments, or at the time of giving credit to the seller, whichever is earlier.

  • This TDS on the immovable property has to be paid by using Form 26QB. It should be completed within 30 days from the end of the month in which TDS was deducted.

  • The buyer is required to furnish the TDS certificate in Form 16B to the seller after depositing the TDS to the government. It is available around 10-15 days after depositing the TDS.

How to Pay TDS Through Challan 26QB and Obtain Form 16

Mentioned below is the step by step guide on how to claim TDS on sale of property in India through Challan 26QB and get Form 16B.

Step 1: Payment Using Challan 26QB, Both Online and Offline

  1. Go to the official website at tin.nsdl.com. Choose ‘Services’ from the tab and select ‘e-payment-Pay taxes online’. A new window with different challans will appear on the screen.

  2. Click the ‘Proceed’ button on the tab ‘TDS on property (Form 26QB). A new screen will be displayed.

  3. If you are a corporate payer, choose ‘Code 0020’. If you are a non-corporate payer choose ‘0021’. Other important details like FY, AY, type of payment will be auto-filled.

  4. Enter the accurate required details in other tabs like PAN of the buyer, PAN of the seller, complete address of transferee as well as transferor, resident/non-resident, full address of the property, the amount paid in figures and words, tax amount to be deposited, among others.

  5. Then comes the ‘Payment info’ tab. Out of the two modes of payment, e-tax payment immediately (through net banking) and e-tax payment on the subsequent date (by visiting any of the bank branches), proceed by choosing the desired mode.

  6. After choosing net banking, you will be able to login into your bank and complete the payment online. The bank then lets you print Challan 280 with a tick on (800). Take a printout of this for future reference.

  7. If you are unable to pay online, an online receipt of Form 26QB with a unique acknowledgement number is generated. This number is valid for 10 days. You can take this receipt to an authorised bank along with your check and complete the payment. Your challan will be generated after the bank proceeds with your payment.

Step 2: TRACES Registration

  1. You will have to register on TRACES as a taxpayer if you are a first time user. The registration can be done by using your PAN card number and the registered Challan number.

  2. After successful registration, you will be able to get an approved Form 16B, i.e. TDS certificate. You can then issue this form to the seller.

  3. If you check your Form 26AS after seven days of payment, you will see your payment reflected under ‘Details of Tax Deducted at Source on Sale of Immovable Property u/s 194(IA) [For Buyer of Property]’.

  4. Details like TDS certificate number, name and PAN of deductee, date of transaction and amount, acknowledgement number, date of deposit and the TDS deposited are mentioned in Part F.

Step 3: Download Form 16B

  1. After the successful payment of Form 26AS, log in to TRACES and click on the ‘Form-16B (for the buyer)’ option in the download tab.

  2. To complete the process, enter the PAN details of the seller and acknowledgement number details pertaining to the property transaction. Click on ‘Proceed’.

  3. Cross-check all the details once and click ‘Submit a request’.

  4. Your request will be processed after a few hours. Click on the ‘Downloads’ tab and select ‘Requested Downloads’ from the available drop-down menu.

  5. The status of your Form 16B download request will be shown as ‘Available’.

  6. If the status reads as ‘Submitted’, wait for more hours and repeat the last step.

  7. Download the ‘.zip file’ and open it with the date of birth of the deductor as a password. Your form will be available inside the .zip file as a PDF. Take a printout of it.

When More Than One Buyer or Seller is Involved

In some transactions, there is a possibility that more than one buyer might be involved in a property. In such a case, if the individual price of the purchase of each buyer is below the set limit of ₹50 lakh but the aggregate value of the complete transaction is above ₹50 lakh, Section 194IA will be applicable. In this scenario, TDS on the sale of the property will have to be deducted and deposited to the government before the prescribed due date.

Similarly, there might also be a possibility that more than one seller is involved in the transaction. In such a case, if the individual sale price of each seller is less than ₹50 lakh but the aggregate value is above ₹50 lakh, a TDS on the sale of property in case of joint sellers will be deducted by the buyer at the time of making each payment.

Importance of Form 26QB in Filing TDS on Sale of Property

Filing TDS on sale of property in India through Form 26QB is mandatory in case of transactions above ₹50 lakh. The IT department receives an Annual Information Return (AIR) from the registrar/sub-registrar office regularly as it is regarding the purchase and sale of property. The department can figure out transactions above ₹50 lakh from this report.

If a buyer has not deducted the TDS on sale of property in India at 1% or 0.75%, whichever is applicable, or has not filed the TDS in the specified time, he/she will get a notice from the Income Tax Department. Therefore, it becomes important to file TDS on sale of property using Form 26QB.

Implications of Non/Late filing of TDS Statements

There are several implications of non-filing or late filing of TDS on sale of property for both buyer and the seller. Let’s have a look at them.

Implications for Buyer

  • A fee might be levied under Section 234E of the IT Act in case of defaulting on account of non-filing or late filing of Form 26QB.

  • A sum of ₹200 will have to be paid by him/her per day during which the failure continues.

  • The buyer will also be liable for defaults of late deduction, late payment and interest thereon. The assessing officer might also levy a penalty under Section 271H on the buyer.

Implications for Seller

  • The seller will not be able to claim TDS credit in the case of non-filing or late filing of Form 26QB.

  • The TDS on sale of property should be deposited to the government account by net banking or by visiting any of the authorised bank branches. Any amount deducted under Section 194IA is required to be paid to the credit of the central government. This payment should be done within seven days from the end of the month when the deduction is made.

Penalty for Non-Deduction/ Deposit of TDS on Property

If the TDS on sale of property has not been deducted, the buyer would be liable to pay an interest at 1% per month on the amount that is not deducted. If the TDS on sale of property is deducted but has not been paid, an interest of 1.5% per month would apply.

Penalty for late deposit of TDS on sale of property: A penalty up to ₹1 lakh might also be levied by the income tax officer for late deposit of TDS on sale of property in India.

Penalty for late filing of Form 26QB: If there is a late filing of TDS return, a penalty of ₹200 per day would be levied until which the late filing continues. However, this penalty should not exceed the TDS amount for which the Form has not been filed.

TDS on Sale of Property: Points to Remember

  • The TDS rate on sale of property is at 1% of the total transaction value if it exceeds ₹50 lakh. It has to be deducted by the buyer and not the seller

  • TDS on sale of property has to be paid through Challan 26QB

  • The buyer should collect the PAN of the seller and verify it too with the original PAN card

  • Make sure there is no error in quoting the PAN or other important details as there is no online provision to rectify such errors. In case such errors happen, you will have to contact the Income Tax Department

  • A seller should verify the deposit of taxes by the purchaser in Form 26AS Annual Tax Statement

FAQs

  • ✔️What is TDS on sale of property?

     A purchaser of immovable property like a building, land, house (except agricultural land) is required to pay 1% of the total transaction value as TDS on sale of property if the total sale consideration is above ₹50 lakh.

  • ✔️Who is responsible to deduct TDS on sale of property?

     The buyer of the said property is responsible to deduct the TDS on sale of property and not the seller.

  • ✔️Is TDS on sale of property refundable?

     Yes, TDS on sale of property in India is refundable. A buyer is required to deduct the TDS and deposit the same with the government. However, the seller can avail credit of the same or claim a TDS refund by filing ITR.

  • ✔️Can the seller pay TDS on property on behalf of the buyer?

     No, the responsibility of deducting TDS on sale of property lies solely with the buyer. In some cases, banks can deduct the TDS on sale of property from disbursement and help in depositing the same on buyers behalf. However, they are not obliged to do the same.

  • ✔️What is the rate of TDS on sale of property by NRI?

     In the case of NRIs, the buyer will have to deduct a TDS on sale of property at the rate of 20%.

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