TDS on Sale of Property

As per section 194-IA of Income Tax Act 1961, A buyer of immovable property will have to deduct TDS @ 1% at the time of payment to the seller if the consideration of such immovable property exceeds Rs 50 lakhs. It is the responsibility of the buyer to deduct the tax and deposit the same with the Government, In case the seller does not provide the details of the PAN then the buyer will have to deduct the TDS @ 20%.

⇒ Generally, for deduction of TDS a person is required to obtain TAN. But for deduction u/s 194IA, the buyer of immovable property shall quote details of PAN instead of TAN.

⇒ If the immovable property is agricultural land, TDS will not be deducted under this section.

⇒ If the seller is a non-resident(NRI), then TDS will not be deducted under this section but under section 195.

⇒ For the immovable properties bought after 1st September 2019, consideration would include the charges that are incidental for the transfer of the property. For e.g. Charges in the nature of car parking, club membership, water & electricity facility fees or such other charges will be added while checking the consideration threshold of Rs 50 Lakhs.

⇒ TDS is to be deducted on the entire amount if it exceeds Rs. 50 Lakhs and not on the amount which exceeds Rs 50 Lakhs.

⇒ If the payment is made in installments, then the buyer has to make sure that TDS is deducted at the time of payment of every installment.

⇒  As a measure of relief considering the COVID pandemic, the rate of TDS was reduced to 0.75% for the immovable properties bought between 14th May 2020 to 31st March 2021.

The buyer has to deposit the TDS by a challan-cum-statement in Form 26QB from the TIN -NSDL portal.

TDS is calculated on the stamp duty value of the property. Here, the stamp duty value of the property means the value of the property as determined by the Stamp Duty Department and not the agreement value between the buyer and seller.

TDS under this section can be deposited to the credit of the Central Government within 30 days from the end of the month in which the deduction is made.

For e.g. If a property is bought by making a lump sum payment in Feb 2021 then TDS can be deposited up to 30th March 2021. If the property is bought in installments and payment for an installment was made in March 2021 then TDS can be deposited up to 30th April 2021.

Note: A form 26QB needs to be furnished for each buyer-seller combination. For e.g. if there is a single buyer-seller transaction then one Form 26QB needs to be filed. But if there are joint buyers or/joint sellers then for each combination of buyer-seller Form 26QB If two buyers and one seller then 2 Form 26QB will be filed. If two buyers and two sellers then 4 Form 26QB will be filed.

The buyer will have to furnish the certificate of TDS in Form 16B to the seller within 15 days from the due date of furnishing Form 26QB.

For e.g. If a property is bought by making a lump sum payment in Feb 2021 then TDS can be deposited up to 30th March 2021 and Form 16B needs to be furnished to the seller up to 15th April 2021.