TDS on sale of immovable property

Introduction:

When it comes to buying or selling property in India, taxes are an important part. One such tax is the Tax Deducted at Source (TDS) on the sale of property under Section 194-IA. Property here refers to only immovable property like land and buildings. Before making a payment to the seller, buyer has to deduct tax at the time of purchasing property. While making a purchase of the property, the buyer has to deduct tax before making a payment to the seller. Let's dive deeper into what is TDS on sale of property under Section 194IA, who is responsible for deducting it and how to file TDS on sale of property.

Requirements of section 194IA

When a buyer buys immovable property (i.e. a building or part of a building or any land other than agricultural land) costing more than Rs 50 lakhs, he has to deduct tax at source (TDS) when he pays the seller. This has been laid out in Section 194-IA of the Income Tax Act since 1st June 2013.

• The buyer has to deduct TDS at 1% of the total sale amount. Please note, the buyer is required to deduct TDS, not the seller
• TDS is required to be deducted only if total sale price is Rs 50 lakh or more
• If the payment is made by instalments, then TDS has to be deducted on each instalment paid.
• ‘Consideration for immovable’ property shall include all charges like nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to the transfer of the immovable property. This is applicable for immovable property purchased on or after 1 September 2019 as per Budget 2019.
• TDS is to be paid on the entire sale amount. 
• Example for TDS on Sale of Property, if you have bought a house at Rs 55lakh, you have to pay TDS on Rs 55 lakh and not on Rs 5 lakh (i.e. Rs 55 lakh – Rs 50 lakh). This is applicable even when there is more than 1 buyer or seller. Post the budget 2019 amendment to section 194-IA, in the above example, if on 1 September 2019, you have paid Rs 2 lakh towards parking fee, Rs 1 lakh for water facility fee and Rs 1 lakh for electricity fee, your sale consideration would be Rs 59 lakh (55+2+1+1). You will have to pay TDS on Rs 59 lakh @ 1%. Your TDS payable would be Rs 59,000. 
• Buyer of the property need not obtain a TAN (Tax Deduction Account Number) for depositing TDS with the government. You can make the payment using your PAN.
• For the purpose of depositing TDS, buyer will have to obtain the PAN of the seller, else TDS must be deducted at 20%.
• TDS is deducted at the time of payment (including instalment payments) to the seller
• The TDS on the immovable property has to be paid using Form 26QB within 30 days from the end of the month in which TDS was deducted.
• After depositing TDS to the government, the buyer is required to furnish the TDS certificate in form 16B to the seller. This is available around 10-15 days after depositing the TDS. The buyer is required to obtain Form 16B and issues the form to the seller. You can check the procedure to generate and download Form16B from TRACES here.

Steps to pay TDS through challan 26QB and to obtain Form 16

The steps to pay TDS through challan 26QB and to obtain Form 16B (for the seller) are as follows:

e-Payment through Challan 26QB (Online) 

I. Steps to fill form 26QB:

• Log on to website e-filing portal? ( https://www.incometax.gov.in/iec/foportal/ ).
• Under 'e-file', click on 'e-Pay tax'
• Then Click on ‘New Payment’
• Select ‘Proceed’ under ‘26 QB (TDS on Sale of Property)’ field
• Fill the complete form as applicable.
• (User should be ready with the following information while filling the form 26QB :
• Residential Status of seller
• PAN of the seller & buyer
• Communication details of seller & buyer
• Property details
• Amount paid/credited & tax details
• After submitting, the next page will ask to select the mode of payment i.e.,:
• Net banking;
• Debit Card;
• Pay at Bank counter;
• RTGS/NEFT; or
• Payment Gateway.
• Select the appropriate payment mode and click on continue to make the payment.
• On successful payment a challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment? being made.

Proceed to TRACES portal ( www.tdscpc.gov.in) after 5 days to download Form 16B.

II. Steps to Download Form 16B:

• Register & login on TRACES portal ( www.tdscpc.gov.in) as taxpayer using your PAN.
• Select "Form 16B (For Buyer)" under "Downloads" menu.
• Enter the details pertaining to the property transaction for which Form 16B is to be requested. Enter the Assessment Year, Acknowledgment Number, PAN of Seller and click on "Proceed".
• A confirmation screen will appear. Click on "Submit Request" to proceed.
• A success message on submission of download request will appear. Please note the request number to search for the download request.
• Click on "Requested Downloads" to download the requested files.
• Search for the request with request number. Select the request row and click on "HTTP download" button. ?????
• Click here ?to go 'TDS on Sale of Property' ?page at TRACES Website ??????????????

Frequently Asked Questions

What is TDS on sale of the property?

The Finance Bill 2013 has proposed that the purchaser of an immovable property (other than rural agricultural land) worth ` 50 lakh or more is required to deduct TDS at the rate of 1% from the consideration payable to a resident transferor

Who is responsible to deduct TDS on the sale of the property?

The buyer of the property is liable to deduct TDS and deposit the same in the government’s treasury.

I am a buyer of the property, do I require to obtain TAN to deduct TDS on sale of property?

Buyer or Purchaser of the property is not required to procure Tax Deduction Account Number (TAN). All that is required is the buyer’s and sellers PAN to report the TDS.

What if I don’t have sellers PAN to deduct TDS on sale of property?

PAN of the seller is mandatory. The same may be acquired from the seller before effecting the transaction.

I have encountered an error on the NSDL e-Gov website while entering online form details, what should I do?

If any problem is encountered at the NSDL e-Gov website while entering details in the online form, then contact the TIN Call Center at 020 – 27218080 or write to us at tininfo@nsdl.com 

(Please indicate the subject of the mail as Online Payment of Direct Tax_ TDS on sale of property).

How are transactions of joint parties filed in Form 26QB?

The Form 26QB challan has to be filled by each buyer for every unique buyer-seller combination for their respective share. 

For example, in the case of one buyer and two sellers, two forms have to be filled in. Similarly, if there are two buyers and two sellers, then four forms will have to be filled in.