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The buyer of an immovable property, valued at Rs 50 lakh or more, is required to pay TDS to the government. This article explains what is TDS on property, who pays it, how it is paid. Since when was the rule introduced? How to interpret limit of 50 lakh in case of EMI instalments, multiple buyers, multiple sellers. How TDS is reflected in Form 26AS? Downloading Form 16B?

TDS on Property

TDS is a certain percentage deducted at the time of payments of various kind such as  salary, commission, rent,  interest on dividends  etc and deducted amount is remitted to the Government account.  This withheld amount can be adjusted against tax due. The person/organization deducting the tax is called as Deductor while the person from whom the tax is deducted is called Deductee.

When was the rule for payment on TDS on property introduced and why?

From 1st June 2013 the rule was introduced for compulsory tax deduction( TDS or withholding tax)  by a buyer of an immovable property (other than agricultural land) valuing Rs. 50 lakh or more. This rule also covers the property purchased through home loan.  It also has to paid when the buyer buys an under construction and part payment is done. TDS is deducted on Fixed Deposits,Salary etc. To know more about TDS or Tax Deducted at Source one can read our article Basics of Tax Deducted at Source or TDS

It comes under the  Sec 194 IA, the Income Tax Act 1961. Section 194-IA is applicable to all including relatives, minor, senior citizens etc. However, if transfer is a gift, then one does not have to pay TDS. The main objective for introducing this rule is to track all the high value real estate transactions which were not being registered. Tax so deducted should be deposited to the Government Account online  through any of the authorized bank branches using the e-Tax payment option available at NSDL.

If property is bought from Non-Resident Indian (NRI) then section 194-IA will not be applicable but  section 195 will come into action. For NRI the limit of Rs 50 lakh is not applicable. If property is bought from NRI, TDS is required to be deducted at the rate of 20% plus Education Cess on the sale amount. Surcharge at the rate of 10% will be applicable if amount paid exceeds Rs 1 crore.

Does TDS on property has anything to do with resultant capital gains?

This deduction has nothing to do with the capital gains for the seller.

Who pays TDS?

Buyer  has to pay the TDS. Whether the seller is a builder or a flat owner making a subsequent sale this tax would have to be paid.

How the TDS would be paid if I buy the property taking loan from a bank or housing finance company?

In such case you need to request the bank/finance company to pay the seller the loan amount net of TDS. You then pay the TDS to the government, and claim reimbursement of the TDS from the bank/finance company.

What are rules of TDS on property regarding joint purchasers or joint sellers?

Value of property should be more than 50 lakhs for TDS deduction. Threshold limit of  Rs 50 lakh (50,00,000)  is value of property, not for the number of instalments, the number of buyers or sellers does not matter at allThe value of property is what is specified  in the transfer documents, and is not on the basis of a notional fair market value, such as a stamp duty valuation, even though such valuation may be higher. The property value will include payments to be made to the seller such as legal fees,payment for parking spaces etc.

If one is paying instalment or EMI of say Rs 50 thousand a month but property value is 90 lakh then as the property value is more than 50 lakh though EMI is less than 50 lakh the TDS would be required to be deducted  for each instalment.

Same is the case for multiple buyers or sellers. If  Ram,Shyam sell the jointly owned  property of Rs 60 lakh, the selling  price for each is 30 lakh. So though individual selling price is less than Rs 50 lakh but the sum  value of the transaction exceeds Rs 50 lakh. Thus section 194-IA is applicable and  buyer would have to deduct TDS.

What is the Rate of TDS on Property ?

The rate at which the buyer needs to deduct tax is 1% and it may go up to as high as 20% if the seller does not disclose his PAN. If the property  purchased is for Rs. 70 Lakhs then one needs to pay tax on full amount i.e 70 lakh not only on amount more than 50 lakh i.e. Rs. 20 Lakhs. In this example if buyer knows PAN of seller then buyer would need to submit TDS  @1% of 70 lakh i.e 7 lakh. Note unlike the Self assessment Tax ,No surcharge and education cess is applicable while deducting tax on sale of property. 

TDS would depend on actual cost or stamp duty valuation?

The applicability of TDS is only to the actual consideration specified in the transfer documents, and is not on the basis of a notional fair market value, such as a stamp duty valuation, even though such valuation may be higher.

Does the actual consideration include any other payments other than the property valuation?

Yes. The consideration would include various  payments required to be made to the seller, such as legal fees, contribution towards shares,payment for parking spaces etc.

Would Stamp duty, Registration Fees or Transfer Fees be subjected to TDS?

No. Stamp duty, registration fees or transfer fees which are to borne by the purchaser would not be regarded as payments being made to the seller as consideration and hence would not be subjected to TDS.

Will TDS be applicable in case of purchase of agricultural land?

No. The TDS on property does not apply to purchase of agricultural land  Definition of agricultural land is as follows :

  • It is situated within jurisdiction of Municipality or Cantonment Board which has a population of not less than 10,000 or
  • It is situated in any area within below given distance measured aerially:
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

What if buyer does not pay TDS?

If TDS is not paid then interest and penalty would be imposed on the buyerInterest will be charged at the rate of 1% per month or part of the month if one does not deduct tax or deducts less tax from the day tax was supposed to be deducted to the day tax was actually paid.  The tax deducted has to  be paid within seven days from the end of the month of deduction. Interest will be charged @ 1.5% p.m or part of the month for tax deducted but not paid to the government from the date of deduction till the date of actual payment.

Process to Pay TDS on property

 

How does the Buyer deposit the TDS to Government?

 TDS on Property is to be done online . The tax should be deposited through challan-cum-statement using Form No.26QB. Form No 16B (TDS Certificate) will be issued by the buyer/deductor within fifteen days from the due date of depositing tax. Overview of steps are as follows. These are explained below.

  • Provide Information regarding the transaction of property online at TIN website at https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jspThe online form available on the TIN website for providing information on TDS on property is called Form 26QB
  • Pay TDS : After successfully providing details of transaction, nine digit alpha numeric Acknowledgement number would be generated. The  buyer or deductor now can:
    • Either pay TDS online immediately through net banking OR
    • Pay TDS within 10 days through net-banking  or by visiting any of the authorized Bank branches.
  • On successful payment a challan counterfoil will be displayed containing Challan Identification Number CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment being made.
  • Generate Form 16B. Form 16B is the TDS certificate issued by the Buyer  to the Seller. Buyers are advised to save the Acknowledgement Number for downloading the Form 16B from TRACES website. Usually TDS certificate is available for download from the TRACES website after at least 2 days of deposit of tax amount at the Bank. For buyer TDS paid  gets reflected in Form 26AS,usually after 7 days, Check  in Part F of the Form 26 AS under Details of Tax Deducted at Source on Sale of Immoveable Property u/s 194(IA)

How is Form 26QB to be filled for multiple buyers and sellers?

In case of multiple sellers, Form 26QB needs to be filed for each seller separately. Similarly, in case of multiple buyers, each needs to issue Form 26QB separately. Quoting from FAQ on NSDL site

How will transactions of joint parties (more than one buyer/seller) be filed in Form 26QB?

Online statement cum Challan Form/ Form 26QB is to be filled in by each buyer for unique buyer-seller combination for respective share. E.g. in case of one buyer and two sellers, two forms have to be filled in and for two buyers and two seller, four forms have to be filled in for respective property shares.

What information needs to be provided for paying TDS for property in Form 26QB?

Information that needs to be provided for paying TDS for property in Form 26QB is as follows:

  • Buyer: Name , PAN number and Complete Address of buyer. Buyer is technically called Transferee.
  • Seller : Name , PAN number and Complete Address of seller. Seller is technically called Transferor.
  • Property: Address of the property,
  • Transaction detail : Date of Agreement, Total Value of Consideration,Payment Type (In Lump Sum or instalment), TDS details.

Can one track the TDS? How does TDS show up in Form 26AS?

As you know Form 26AS tracks the tax paid to government, TDS on salary, advance, self assessment tax. So even TDS on Sale of property shows up in Form 26AS seven days after payment as shown im image below

  • For Seller of property TDS is reflect in Part A2 under Details of Tax Deducted at Source on Sale of Immoveable Property u/s 194(IA) [For Seller  of Property] 
  • For Buyer TDS is reflected in Part F under Details of Tax Deducted at Source on Sale of Immoveable Property u/s 194(IA) [For Buyer of Property].
TDS details of Buyer and Seller of Property in Form 26AS for TDS on Property

TDS details of Buyer and Seller of Property in Form 26AS

Steps to pay TDS on property

Steps to pay TDS on property online with paying tax online are as follows:

  1. Go to NSDL-TIN website https://www.tin-nsdl.com
  2. Click on the option TDS on Sale of Property. It will open  Form 26QB
  3. Fill the details as required in Form 26QB
  4. Then click on PROCEED button. PAN Details will be validiated.
  5. After validation of PAN, verify the details entered by you and click Confirm.
  6. After confirming, select the payment method
    1. If you paying immediate through netbanking, click the option for submitting it to the Bank and then login to the net-banking site with your user ID & password and enter the payment details.
    2. If you cannot pay online, an online receipt for Form 26QB with a unique Acknowledgment Number is generated which is valid for 10 days after generation. You can take this toone of the authorized banks along with your cheque. The bank will proceed with the online payment and generate your challan.
  7. On Successful payment, Challan will be generated containing Challan Identification Number (CIN) payment details and bank name through which e-payment has been made. The Challan is like a receipt, a proof of payment made.
  8. Buyer should check Form 26AS after 7 days. The TDS paid should be reflected there as discussed above.
  9. After few days, Buyer can download Form 16B from TRACES  from the  TRACES the website of Centralized Processing Cell of TDS (CPC-TDS) .Login to the TRACES website, and Click on DOWNLOADS tab. In the dropdown menu click on Requested Downloads. If no application has been made buyer will be asked to make a request for download, here fill in the Acknowledgment Number (Nine Digit Number) which is reflected on Form 26AS in Part F as mentioned above. Once this done, buyer will be able to view the status of his application, which generates an Application Request Number. Our article TDS, Form 26AS and TRACES explains TDS and Form 26AS in detail.
    Within a couple of hours, the application gets processed and buyer will be able to view Form 16B by entering the request number which he has have obtained. He can take a printout of the same for his records as well as for handing over to the seller of the property. Download the .zip file. The password to open the .zip file is Date of Birth of Buyer/ Deductor (the format is DDMMYYYY). The form will be  inside the .zip file as a pdf.
  10. Buyer will be responsible to give the certificate of TDS in Form 16B to the seller within 15 days from the due date of submission of the Challan and the seller thus will be able to claim the credit for such TDS against his tax liability.

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