TDS On Sale of Property

TDS on Sale of Property

As per Finance Bill of 2013, TDS is applicable on sale of immoveable property wherein the sale consideration of the property exceeds or is equal to ₹ 50,00,000 (Rupees Fifty Lakhs). Sec 194 IA of the Income Tax Act, 1961 states that for all transactions with effect from June 1, 2013, Tax @ 1% or 0.75% should be deducted (depending upon the Date of Payment/Credit to the Seller) by the purchaser of the property at the time of making payment of sale consideration. Tax so deducted should be deposited to the Government Account through any of the authorised bank branches.

TDS on Sale of Property is levied @ 1% on transaction of all properties where the total transaction value is more than Rs. 50 Lakhs. The manner of levy of TDS on Property has been explained in detail in this article. The topics covered are as under:-

Rate of TDS on Sale of Property

TDS on Sale of property is required to be deducted @1% if the property value is more than Rs. 50 Lakhs. This TDS is required to be deducted for all transactions after 1st June 2013 if the property transaction value is more than Rs. 50 Lakhs. This is applicable on sale of all properties except on sale of Agricultural Land.

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

It is also important to note here that 1% TDS is applicable only if the seller is Resident in India. If the seller is not-resident in India i.e. he is an NRI, then the rate of TDS will change.

The rate of TDS in case of sale of property by Non-Resident would be 20% + Surcharge + Cess. TDS on Sale of Property by NRI would be levied even if the Transaction Value is less than Rs. 50 Lakhs.

Amount on which the TDS is to be deducted

TDS @ 1% is to be deducted on all Property Transactions which are above Rs. 50 Lakhs. This TDS is to be deducted on all types of Property Transactions irrespective of whether the property in consideration is a flat or a building or a vacant plot. TDS is to be deducted irrespective of whether it is a Residential Property or Commercial or Industrial Property. TDS is to be deducted on all types of property transactions except Agricultural Land.

TDS is to be deducted on the total amount paid to the Seller excluding GST. This can be explained with the help of an example:-

Transaction Value for Purchase of Property Rs. 80,00,000
GST on above Property (if property is under-construction) Rs. 9,60,000_
Total Amt to be paid Rs. 89,60,000

In the above mentioned case, TDS would be deducted on the Transaction Value of Property i.e. Rs. 80 Lakhs and not on the GST value. Therefore, the TDS to be deducted would be 1% of Rs. 80 Lakhs i.e. 80,000. 

This TDS is required to be deducted in all cases irrespective of the Capital Gains arising to the Seller. In case, the Seller is of the opinion that excess TDS has been deducted, he can claim refund of the excess TDS Deducted while filing the ITR. 

It is to be noted that the buyer/seller cannot apply for lower deduction of TDS in the above mentioned case and the TDS would be deducted @ 1% of the Total Property Transaction Value.

In case of Home Loan, the TDS would be deducted when the payment is made to the Seller and not when the EMI is paid to the Bank.

Tax deducted on Property to be deposited with Govt

As per the Income Tax Act, any TDS deducted shall be deposited with the govt on or before the specified due dates. Moreover, any person deducting TDS shall also apply for a TAN No. under Section 203A. This TAN No. is mandatory required to be quoted at the time of deducting any TDS and also at the time of filing returns and deposit of TDS with the Govt.

The insertion of this new section 194IA for deduction of TDS on Property would have caused unnecessary hardship to the buyer of the property as he would have to apply for a TAN No. before purchasing any property. So as to remove any such hardship, the govt has introduced a new sub-section(3) to Section 194IA which states that a person deducting TDS on Property is not mandatory required to possess a  TAN No.

As per Notification No. 30/2016 dated 29th April 2016, the TDS deducted by the buyer at the time of making the payment to the seller has to be deposited within a period of 30 days from the end of the month in which the deduction has been made. For eg: If the TDS has been deducted in the month of April, it should be deposited with the govt before 30th of May. The same applies to all other months as well.

All details regarding the transaction and TDS on Property are required to be furnished in Form 26QB and this Form 26QB is required to be submitted at the time of payment. Details in this form cannot be furnished manually and can only be furnished online through the following link

This Form 26QB can only be submitted online through the above mentioned link. However, the payment of TDS can be done online as well as physically through Bank. After the submission of the Form 26QB – the payer would be given the option to either deposit the TDS online or take a print -out of the furnished Form 26QB and deposit the TDS in the Bank.

After depositing the TDS, the buyer of the property would also be required to issue Form 16B to the Seller of the property in respect of the TDS deducted and deposited with the govt. Form 16B can be downloaded from the website of the centralised processing cell of TDS (CPC-TDS) i.e  after 15 days from the end of month in which the payment has been made.

Procedure for Deposit of TDS on Property with Govt

The Buyer of Property is required to deduct TDS on Property from the Purchase price of the property and deposit this TDS with the Income Tax Department. Form 26QB is required to be furnished mentioning all details which include:-

Once all the details are furnished, the form will ask for the preference for deposit of tds on property with the income tax department. You can either pay the TDS on Property online through net banking and if this option is chosen, this Form 26QB will automatically direct you to the e-payment gateway.

Alternatively, the buyer also has the option of depositing the TDS Deducted on Property offline through Banks as well. If the buyer intends to deposit the TDS on Property offline through Banks, he would be required to select this option in Form 26QB, then take a print out of this Form 26QB and submit the same along with the payment to the authorised bank branches.

Penalty for Non-Deduction/ Deposit of TDS on Property

Interest on Late Deposit of TDS on Property – In case the TDS has not been deducted, the buyer would be required to pay 1% interest per month on the amount not deducted. In case, the TDS has been deducted but has not been paid, Interest @ 1.5% per month would be applicable in such a case.

Penalty for Late Deposit of TDS on Property – The Income Tax Officer may also levy a penalty of upto Rs. 1 Lakhs for Late Deposit of TDS on Property.

Penalty for Late Filing of Form 26QB: In case of late filing of TDS Return, a penalty of Rs. 200 per day would be levied. However, the Penalty should not exceed the amount of TDS for which this Form has not been filed.

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