TDS on Property Sale @ 1% under Section 194IA

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The Indian Finance Minister P. Chidambaram while announcing the Budget 2013-14 introduced TDS on Property @ 1% on all Immovable Property Transactions over Rs. 50 Lakhs under Section 194IA.

Reason for Introduction of TDS on Property

tds on property 150x150 TDS on Property Sale @ 1% under Section 194IAP. Chidambaram while introducing TDS on Property said that Transactions of Immovable Property are usually undervalued and under-reported. Almost half of the Transactions don’t even carry the PAN Card No. of the parties concerned.

With a view to improving the reporting of such transactions and the taxation of Capital Gains, P. Chidambaram has introduced section 194IA which states that TDS on transactions of immovable property is to be deducted @ 1% where the consideration exceeds Rs. 50 Lakhs. This Section 194IA would be applicable wef 1st June 2013.

This would also tighten screws on Corruption and Black Money which is being circulated in the Real Estate Market as property transactions are at times used to park and generate black money.

However, Chidambaram specifically mentioned in his Budget speech that sale of Agricultural Land would be exempted from applicability of TDS.

Although the Finance Minister has introduced TDS on Property @ 1%, the corresponding provisions of Section 54 have not been amended. This would lead to anomaly wherein tax may be required to be deducted even in cases where the capital gains are exempted under section 54.

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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 date of deposit of TDS. 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. 39 dated 31st May 2013, the TDS deducted by the buyer at the time of making the payment to the seller has to be deposited within a period of 7 days from the end of the month in which the deduction has been made. 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

https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp

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. www.tdscpc.gov.in

Procedure for Payment of TDS on Property

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 regarding the property purchased, tds on property deducted under Section 194IA, details of the buyer, details of the seller etc. Do not commit any errors in quoting the PAN or any other details in the Online Form as their is no online mechanism for rectification of errors. For the purpose of rectification, you will have to contact the Income Tax Department.

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.

You can also refer this tutorial on procedure for e-payment of TDS on Property online

Download (PDF, 1.18MB)

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. The list of banks wherein TDS on Property can be deposited is mentioned in this link.

It should be noted that there is no option for furnishing details in Form 26QB manually and all these details are required to be furnished in the online Form 26QB and the buyer can then take a print out of the same and submit this Form 26QB along with the payment to the Bank.

You can also refer this tutorial for procedure for payment of TDS on Property through Banks:-

Download (PDF, 1.37MB)

TDS on Amount paid in Installments

As per Section 194IA, TDS is to be deducted at the time of payment. The date of transfer is not relevant as TDS is not required to be deducted at the time of transfer but is required to be deducted at the time of payment.

Therefore, irrespective of the date of transfer, the TDS is required to be deducted at the time of payment. So even if advance payment is being made, TDS would be required to be deducted. Moreover, in case the payment is being made in Installments to the Seller, the TDS would be deducted at the time of paying each installment.

More than 1 Buyer or 1 Seller

In case there is more than 1 buyer and the individual purchase price of each buyer is less than Rs. 50 Lakhs, but the aggregate value of the transaction exceeds Rs. 50 Lakhs, Section 194IA would be applicable and the TDS on Property would be required to be deducted and deposited with the govt before the due date.

Similarly, if there is more than 1 seller and the individual sale price of each seller is less than Rs. 50 Lakhs, but the aggregate value of the transaction exceeds Rs. 50 Lakhs, Section 194-IA would be applicable and TDS would be required to be deducted by the buyer at the time of making the payment to the seller.

Other Relevant Points regarding TDS on Sale of Property

  1. TDS on sale of property is required to be deducted on the total amount in case the value of the property sold is more than Rs. 50 Lakhs. This can be explained with the help of an example. If the property sold is worth Rs. 85 Lakhs, the TDS would be deducted on Rs. 85 Lakhs and not on Rs. 35 Lakhs (i.e. 85 Lakhs – 50 Lakhs). TDS on property in this case @1% would be Rs 85,000
  2. In case of more than 1 buyer/ 1 seller, Form 26Q has to be filled in separately for each buyer-seller combination. Eg: In case of 1 buyer and 2 sellers – 2 forms have to be submitted, and in case of 2 buyers and 2 sellers – 4 forms have to be submitted for their respective property share.
  3. The PAN Card of the Seller as well as the Buyer should be mandatory furnished in the Form 26QB for furnishing information regarding the tds on property and the sale transaction.

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