A TDS or Tax Deducted at Source denotes the tax deducted by the payer on payment made to the recipient. While most buyers are informed about tax liabilities related to the sale of property, not many people know about the TDS on purchase of a property. TDS is applicable to payments connected with the purchase of an immovable property. Any individual purchasing a property from a transferor must deduct tax on any amount paid.
If you are planning to buy a property, learn about TDS on purchase of property, TDS on property purchase from an NRI, TDS rates, how to pay TDS, how to deposit TDS online and penalty for not filing Form 26QB. Read on!
According to Section 194-IA of the Income Tax Act, the TDS on property purchases worth above 50 lakh is applicable at the rate of 1%. Such properties include residential property, land and commercial property. Buyers are required to deduct the TDS either when they are implementing the conveyance deed or when making payment of any required advance before executing the deed.
Furthermore, individuals are required to pay TDS on the purchase of immovable property to the Central Government within a span of 30 days from the last day of the month wherein tax is deducted. Here, agricultural land is an exception. The buyer must provide a TDS certificate to the seller 15 days prior to the due date of depositing the tax-sheet.
Note that the rate of TDS on property purchases from an NRI is not similar. If an NRI sells a property, the buyer is eligible to deduct TDS at 20% when purchasing a property from an NRI. However, if the property was sold 2 years from the purchase date, TDS on property purchase could increase to 30%.
This is because tax deduction in terms of long-term capital gains is 20%, and short-term gains are taxable based on the applicable income tax slab rates for NRIs in India.
When an individual files forms for TDS on purchase of property, individuals are required to fill out Form no. 26QB. If there is more than one seller or buyer, one needs to fill out Form 26QB with all required details.
Here is the step-wise guide on paying TDS on property purchase from an NRI via Challan 26QB and availing Form 16:
Click on Tin-NSDL and choose ‘services’ from tab and choose ‘e-payment’ taxes. A new box with multiple challans will be displayed on the screen
Click on ‘Proceed’ ‘under the section TDS on property (Form 26QB)’. A new screen will appear.
If you belong to a corporate payer list, select ‘Code 0020’. However, in case you belong to the non-corporate payer list, choose ‘0021’. Other crucial details such as AY, FY, and payment type will be automatically filled.
Enter appropriate details in the respective fields such as buyer’s and seller’s PAN details, address of transferee and transferor, non-resident/resident, property’s full address, deposited tax amount, the paid amount in words and figures, etc.
Choose the mode of payment; it is possible to make e-tax payments by visiting the branch. After selecting net banking, you can log in to your online banking profile and complete the payment successfully. Finally, take a print-out of the payment receipt for future reference
After this, you need to register on TRACES you are using this portal for the first time. You can complete this registration by using PAN and registered Challan number. After this registration, you will receive an authorised Form 16B (TDS certificate). Individuals can issue it to the seller.
To obtain Form 16B, individuals need to follow this step-wise procedure mentioned below:
Step 1: After successful payment, click on Form 16B.
Step 2: To complete this process successfully, enter the seller’s PAN information and acknowledgement details related to the property. Next, click on ‘Proceed’.
Step 3: Verify all details and select ‘Submit a request.’
Step 4: The processing of your request will take a few hours. Click on ‘Downloads’ from the available drop-down menu.
Step 5: Status of Form-16B download request will appear as ‘Available’.
Step 6: If status shows ‘submitted’, wait for some more hours and repeat the previous step.
Step 7: You need to download the zip file, and you will find Form 16B inside it.
According to Section 194-IA, TDS on a land purchase or any other immovable property purchase is deducted during payment. Therefore, the transfer date is not important as TDS does not take place during the time of transfer but at the time of payment. Therefore, irrespective of the transfer date, TDS needs to be deducted at the time of payment. So, if one makes a payment in advance, a TDS deduction will take place.
Moreover, in case payment for property purchase is made in instalments to the seller, the TDS will be deducted during the time of paying each instalment.
This TDS deduction is required when an instalment is paid to the developer and not when EMI is paid to a financial institution. If the financial institution has paid the builder, this payment is made to the developer on the buyer’s behalf.
In some situations, there’s a chance that more than one buyer is involved in a property. In such cases, if the individual price of property purchase of each buyer is below a certain limit of Rs. 50 lakh, but the entire value of a transaction is more than Rs.50 lakh here, Section 194IA of the Income Tax Act is applicable. In such a scenario, TDS on a property’s sale will be deducted and deposited to the government before the stipulated date.
On the other hand, there are chances of the involvement of more than one seller in the transaction process. In such cases, if the individual property sale price of each seller is less than Rs. 50 lakh, but the absolute value is more than Rs. 50 lakh, a TDS on property’s sale in case of joint sellers will be deducted by buyer while making payments.
If an individual files a TDS return after the stipulated time, a penalty of Rs. 200/day will be imposed till the late filling continues. However, this penalty must not exceed the TDS amount for which the form has not been filed.
To pay TDS on the purchase of property, individuals need to obtain a tax deduction account number (TAN). However, if the property is immovable, you do not have to obtain TAN.
Here is the step-wise guide to pay TDS online:
Step 1: Visit the Tin-NSDL website.
Step 2: Select ‘TDS on sale of a property.’
Step 3: Next, select ‘online form for furnishing TDS on a property.’
Step 4: Choose the form stating ‘TDS on sale of a property.’
Step 5: Fill in necessary details of both buyer and seller, including property details, personal details, PAN, tax deposit, etc.
Step 6: Individuals need to confirm the submission and save this number for future reference.
Step 7: Make payment through net banking.
A comprehensive knowledge about TDS while planning to invest in a property can. Knowing about these deductions in detail will allow individuals to avoid paying additional fees or penalties.
Ans: In recent times, virtual assets have gained massive popularity, and trading volume in relation to such digital assets has risen significantly. Therefore, effective from July 1 2022, as per Section 194S of the Income Tax Act, TDS deduction will take place on the amount paid for the transfer of digital assets to a resident at the rate of 1%.
Ans: Individuals can pay TDS for house purchases or property purchases online. Alternatively, if they want, they can choose to visit the financial institution and make the payment through their preferred payment mode.
Ans: After a buyer deducts TDS, one must pay it to the government by the 7th of the following month. For instance, if TDS deduction happens in March, the buyer must pay it to GOI by April 7.
Ans: Buyers who are unable to pay the TDS within the due date must pay the penalty in the form of interest, or they face imprisonment of up to 7 years.
Before you go…