How To File TDS on Sale of Property: Registration, Payment Process And Penalty

TDS on sale of property means Tax Deducted at Source (TDS) on the sale of immovable property, including a building, flat or vacant plot. Under Section 194IA of the Income Tax Act, 1% TDS on your transaction cost is applicable if the property value exceeds the limit of Rs. 50 lakh. Buyers must ensure tax is deducted and deposited to the government; after the deduction and deposition, they will have to provide the TDS certificate to the seller. 

This post helps you understand TDS on sale of property – requirements, how to file a TDS on property sale, registration and payment process, how to fill Form 26QB, TDS on sale of property by NRIs and the penalty for non-payment of TDS on sale of the property. Read on!

Section 194IA: What is TDS on Sale of Property?

As per current guidelines, there is no instruction on how to calculate TDS if there is a difference between the actual sale value and the stamp duty value of the property. To abolish this inconsistency, the current Finance Minister Nirmala Sitharaman proposed to deduct 1% TDS on the sale of a non-agricultural immovable property on either its stamp duty value or its sale price, whichever is higher. This amendment is applicable from April 1, 2022. However, this also means that no deductions shall be made if the property value is less than Rs. 50 lakh. 

Additionally, buyers can choose to make payments in instalments. For immovable properties bought on or after September 2019, sale amount must encompass club membership fees, electricity charges, maintenance fees and more. TDS on sale of immovable property is based on the sale amount stated in sale deed and is dependent on the capital gains.

Note, TDS is applicable to Indian residents only. If an assessee is a non-resident, then their applicable rate of deduction changes. A non-resident must pay a TDS of 20% + surcharge + cess. Also, TDS is applicable even if their property value is less than Rs. 50 lakh.

Rate of TDS on Sale of Property

The prevailing TDS rate on sale of property is 1% to 0.75%, as set by section 194IA of the Income Tax Act. As per Budget 2022, property buyers must deduct 1% TDS on the overall sale value of the property.

Rate of TDS on Sale of Property Requirements Under Section 194IA

The following are the requirements of Section 194IA:

• TDS is something that buyers have to deduct rather than the seller.
• If buyers choose to settle their payment in instalments, then they should make their deduction in instalments with each payment.
• When calculating the total consideration of the property, all expenses, including car parking fee, club membership fee, maintenance fee, electricity or water facility fee, the advance fee shall be accounted for. This is for immovable properties acquired on or after September 1, 2019.
• TDS on the sale of immovable property is applicable on the entire sale value. 
• TAN is not mandatory for paying the TDS amount. One can make TDS payment with PAN. 
• Having PAN of the seller is compulsory; otherwise, the applicable TDS rate stands at 20%. 
• A buyer must deduct TDS at the time of payment or when crediting the amount to the seller’s account, whichever takes place earlier. 
• The payment of TDS shall be made using Form 26QB only. Also, this process should get completed within 30 days of deducting TDS. 
• A buyer must present a TDS certificate in Form 16B to its seller. This form is available after 10 to 15 days from the date of TDS payment.  

How to File TDS on Sale of a Property?

Here’s a step-by-step guide on how to pay TDS through Challan 26QB:

Payment through Challan 26QB

If you don’t want to make an online payment, generate Form 26QB online using the unique Acknowledgement Number. Remember, it has a validation of 10 days, so take it to the bank for making payment before that. 

How to Register on TRACES

Step 1: If you are a first-time payer, you need to register in Traces using your PAN and challan number.

Step 2: After registering, you can get hold of your TDS certificate or Form 16B and issue it to the seller. 

Step 3: You can also check your payment status, like details of ‘TDS on sale of immovable property u/s 194 IA’ after seven days. 

Step 4: You can also find details of the deductee’s PAN, name, acknowledgment number, date, transaction amount, Form 16B number, and other information in PART F. 

 Also, know about how to obtain Form 16B for sellers in the below details:

How to Obtain Form 16B

Step 1: After making your payment, click on the Form 16B tab by logging in to your TRACES account.

Step 2: Enter the seller’s PAN details and acknowledgment number to complete the process and click on ‘proceed.’

Step 3: After double-checking every detail, select the ‘submit a request’ option. 

Step 4: It will take a few hours to approve your request. Next, click on the ‘request download’ option available in the drop-down list.

Step 5: The status will change to ‘available’ or ‘submitted.’ If it is the latter, wait for a few more hours and reapply for the process.

Step 6: Lastly, download the zip file by entering your password (your date of birth).  

Also Read: Section 194IA Of Income Tax: TDS On Immovable Property

How to Pay TDS on Sale of Property Online?

Here are the steps that will help you to pay TDS on sale of property online:

Step 1: Go to the official website of NSDL. 

Step 2: Choose ‘Services’ and click on ‘e-payment-Pay taxes online’

Step 3: On getting redirected to a page showing different challans, click on ‘Proceed’ tab. 

Step 4: Corporate payer must select the code 0020 and the non-corporate payer must choose 0021. On providing the code, details like financial year, payment mode, and assessment year will be automatically displayed on the screen.

Step 5: You are required to provide other details like seller’s and buyer’s PAN, transferee’s full residential address, property’s complete address, amount paid and more. 

Step 6: You will come across the ‘Payment info’ tab on providing relevant information. Now choose your preferred mode of payment and select ‘Proceed’.

You will get an online receipt with an acknowledgement number for Form 26QB. This receipt is valid for 10 days. You will have to carry this receipt in any bank to proceed with the online payment.

TDS on Sale of Property by NRIs

TDS provision is different for properties that are brought from NRIs. Here are some of the provisions for those buying properties from NRIs:

1. Regular TDS rate: TDS rate for long term assets is 20%. 

For income below Rs. 50 lakhs	Income ranging between Rs.50 lakh- 1 crore	Income for more than Rs. 1 crore
LTCG tax	20%	20%	20%
Surcharges	0	10% over the above rate	15% over the above rate
Total tax + Surcharge	20%	22% (20% + 2%)	23% (20% + 3%)
Health and education cess	4%	4%	4%
TDS Rates to be applicable	20.80%	22.88%	23.92%

2. Lower TDS Rates

Here are the ways that will help NRI sellers reduce the TDS rates:

• First, the seller should approach the Income Tax Officer of the jurisdiction to apply for a tax deduction.
• On applying for it, the assessing officer furnishes a lower TDS deduction certificate that contains computed capital gains amount on the specific asset.
• The buyers will be referring to this certificate to deduct TDS on the basis of the calculated capital gains in place of the asset value.

3. Changes in the sum on which buyers makes a tax deduction

The sum on which tax deduction takes place for the NRI seller will depend on whether he or she has opted for lower TDS deduction certificate or not. A lower tax deduction implies higher balance for the seller.

In case the NRI doesn’t get a TDS deduction certificate, TDS deduction will happen based on the total sale value of a property. Tax experts often advise NRI property sellers to obtain the certificates to reduce their tax liabilities. 

4. Time of deduction

The deduction time is chosen depending on which one is the earliest (either during income credit or during payment).

5. TDS return and payment 

As a buyer, you need to deposit the challan for TDS deduction within seven days from the end of the month in which the TDS deduction took place. However, you have to provide TDS return through Form 27Q.

Things to Consider for TDS on Sale of Property by NRIs

• Buyers must have a Tax Deduction and Collection Number (TAN) for purchasing a property from an NRI.
• The exemptions under Section 54A and 54C prove beneficial for the NRI seller.
• Non-resident Indians opting to sell property should provide Form 15CA and Form 15CB to the financial institution sending the money out of India. They can download these forms and submit to the banks.

TDS on Sale of Property for Joint Sellers

In case of joint sellers, both have to pay TDS in accordance with the considered sale value or the capital gains. 

TDS on Sale of Property in case of Joint Owners

TDS on sale of property in case of joint sellers, essential property documents reflecting property co-ownership must be provided to the Department of Income Tax. The documents shouldn’t have a mere agreement showing the co-ownership. Rather, there should be details about each owner’s contribution.

 A TDS rate of 1% is applicable if each owner’s sale consideration is above Rs.50 lakhs.

Consequences of Late/Non-Filing of TDS Statement

There are implications for both sellers and buyers in case of late or non-filing of TDS:

Consequences for Buyers

• If a default has been made due to late or non-filing, buyers may have to pay a fee under Section 234EA of the Income Tax Act. 
• Apart from the above, he/she may also be liable for late payment defaults, late deductions, and interests. There is a Section 271H that covers penalties in case of such situations. 
• A buyer will also have to pay an amount of Rs. 200 each day until the failure continues. 

Implications for Sellers

• The option of claiming TDS credit disappears for sellers in case of late or non-filing.  
• Sellers must deposit TDS on sale of immovable property to the government either through net banking or by visiting their nearest bank. Also, they must remember to submit the deducted amount within seven days of the payment. 

TDS on Sale of Property Payment Due Dates

You will get a well-rounded idea regarding TDS payment due date for FY 2022-2023 from the table given below:

Quarter Ending – June 30, 2022

Deduction Month	Due date for TDS Payment
April 2022	May 7, 2022
May 2022	June 7, 2022
June 2022	July 7, 2022

Quarter Ending – September 30, 2022

Deduction Month	Due date for TDS Payment
July 2022	August 7, 2022
August 2022	September 7, 2022
September 2022	October 7, 2022

Quarter Ending – December 31, 2022

Deduction Month	Due date for TDS Payment
October 2022	November 7, 2022
November 2022	December 7, 2022
December 2022	January 7, 2023

Quarter Ending – March 31, 2023

Deduction Month	Due date for TDS Payment
January 2023	February 7, 2023
February 2023	March 7, 2023
March 2023	April 7, 2023 ( when tax is deducted by government office) April 30, 2023 (by other deductors)

Penalty for Late/Non-Filing of TDS on Sale of Property?

Here are the pointers that will acquaint you with the penalty provision in case of late payment of TDS: 

• Under Section 271H, penalty charges can go up to Rs.1 lakh for not paying TDS on time.
• If the tax amount is not deducted on time, you will be charged interest of 1% every month as per section 201(1A) (i).
• You will have to pay a 1.5% interest amount each month for cases where tax is deducted but is not deposited with the government.
• Under section 234E, late filing fee is Rs 200 each day till the day of TDS return file.

The only way you can dodge such penalties is to keep track and make TDS collection and submission on time.

Important Points to Remember

There are some points to remember about TDS for avoiding complications:

For buyers

• Depending on the date of payment, your deduction rate will vary.
• PAN is required to pay TDS on the purchase of a property.
• For carrying out any rectification, you must visit the Income Tax Department.
• There is no rectification process in case wrong PAN details have been provided.
• Make sure to double-check your seller’s PAN with the original one.

For sellers

• Sellers must provide their PAN to buyers.
• Verification in Form 26AS is necessary for confirming deductions made by your buyer. 

Also Read: A Comprehensive Guide On The RERA Act: Meaning & Things To Know

Final Word

To find details regarding TDS applicable for the sale of property, read the above information carefully. It is a tax deducted at source by buyers on the transaction value. There are many conditions to keep in mind in case of late or non-filing. So, check them to avoid any confusion. 

FAQs on TDS on Sale of Property

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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.