TDS on Sale of Immovable Property

Hello and welcome. In this post we will discuss the TDS on sale of immovable property. We will cover the following:

TDS on Sale of Immovable Property

When a buyer buys immovable property (i.e., a building or part of a building) costing more than Rs 50 lakhs, he has to deduct TDS when he pays the amount. The proposal in the finance bill was to make this effective from June 1st, 2013. This is given in Section 194-IA of the Income Tax Act.

The exception to the Act:

  • The provisions of this section are not applicable where section 194LA regarding compulsory acquisition is applicable.
  • If the seller is non-resident or NRI then TDS deduction should be under section 195 on basis of capital gains and not under this section
  • When it comes to under-construction properties, TDS deduction should be in installments paid on or after 1st June 2013. No TDS applies to the installments paid before 1st June 2013.

Buyer or Purchaser of the property is not necessary to procure Tax Deduction Account Number (TAN). The buyer is necessary to quote his/her PAN and sellers PAN.

The rate of TDS deduction:

According to rules in respect of tax deducted at source, the buyer of the property would have to deduct TDS at 1% of the total sale consideration and deposit the same in Government treasury. No TDS deduction if sale consideration is less than Rs 50 lakhs. In case of installment-based payments, each installment has to have TDS deduction.

Tax is to be paid on the entire sale amount. e.g., if you have bought a house at Rs 55lakh, you have to pay tax on Rs.55 lakh and not on Rs.5 lakh (i.e., Rs 55lakh – Rs 50lakh). This is applicable even when there is more than 1 buyer or seller.

PAN of the seller is mandatory. The same may get from the seller before effecting the transaction. If the PAN number of the seller is not available then the TDS deduction is necessary @ 20%.

The tax deduction is not necessary when the total amount of consideration (selling price of the property) is less than Rs.50 lakhs. When the amount of consideration is Rs 50 lakhs or more then the TDS deduction should be from the whole amount not only on the amount exceeding Rs. 50 lakhs.

Deduction and Payment of TDS:

The tax deduction is necessary at the time of credit of such sum to the account of the payee or at the time of payment whichever is earlier. The date of registration, agreement or contract is irrelevant for deciding the time of payment of TDS.

If the purchase value is greater than Rs. 50 lakhs then TDS deduction should be from the 1st installment itself and for every installment. The purchaser should not wait for the aggregate installment amounts to exceed Rs. 50 lakhs. The view that deduction of TDS from the final installment or after exceeding Rs. 50 lakhs is not right.

If the purchaser avails a loan from a bank and bank pays to the seller, then this is also considered as a payment. TDS deduction is necessary on the date of such payment to the seller. The date of payment of EMI by a buyer to the bank is irrelevant.

Periodicity for TDS deposit and filing Form 26QB:

The online form available on the TIN website for furnishing information about TDS on sale of immovable property is termed as Form 26QB.

As per the CBDT notification no. 30/2016 dated April 29, 2016, the due date of payment of TDS on transfer of immovable property has been extended to 30 days (from existing 7 days) from the end of the month in which the deduction is made.

The purchaser of the property has to file Form 26QB which is a Challan-cum-declaration statement within 30 days from the end of the month in which payment is made. No separate filing of TDS returns in respect of such deduction. Form 26QB has to be file online. Manual submission of form is not allowed.

Responsibility of the Seller of the Immovable Property

  • Provide your PAN to the purchaser in order to furnish information regarding TDS to the IT Department.
  • Verify deposit of taxes deducted by the purchaser in the Form 26AS Annual Tax Statement.

Penalty for Non- Deduction/deposit of TDS deducted:

Interest on Late Deduction:

TDS liable to be deducted but not deducted by the buyer of the property will attract an interest of 1% per month on the amount not deducted.

Interest on Late Deposit:

TDS deducted but not deposited by the buyer of the property will attract an interest of 1.5% per month on the amount deducted.

The Assessing Officer may levy a penalty of up to Rs. One Lakh for late deposit of TDS

Penalty for late filing of Form 26QB:

Delay in the filing of Form 26QB may attract late fees of Rs. 200 per day.

Other Points:

  • TDS deduction should be for each installment and for each deduction a separate filing of form 26QB is necessary.
  • Form 26QB is a file for the one-buyer-one-seller combination. E.g., if there are 1 buyer and 2 sellers, then file two Form 26QBs. Similarly, if there are 2 buyers and 2 sellers then file four Form 26QBs. (2 Forms by each buyer) for each deduction.
  • No need of obtaining Tax deduction account number (TAN) of the person who is necessary to deduct tax in this section. Only PAN of the buyer i.e ., the deductor is necessary for filing form 26QB.

About Form 16B:

Form 16B is the TDS certificate to be issued by the deductor (Buyer of property) to the deductee (Seller of property) in respect of the taxes deducted and deposited into the Government Account.

Form 16B will be available for download from the website of Centralized Processing Cell of TDS (TRACES).

After depositing TDS to the government, the buyer is necessary to furnish the TDS certificate (Form 16B) to the seller. This is available around 10-15 days after depositing the TDS.

Agricultural Land Meaning Under Section 194IA:

Agricultural land means agricultural lands in India. Conditions for qualification as agricultural land are:

  • It comes under the jurisdiction of Municipality or Cantonment Board.
  • The population of not less than 10,000.
  • It is situated in any area within below given distance measured aerially.

The land will not be treated as Agriculture Land if:

Population of the Municipality Distance from Municipal limit or Cantonment Board
More than 10,000 but does not exceed 1,00,000 Within 2 kms
More than 1,00,000 but does not exceed 10,00,000 Within 6 kms
Exceeding 10,00,000 Within 8 kms

That is it for this post on TDS on Sale of Immovable Property. We hope that it was helpful. If you have any more questions, drop them in the comment section below.

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