TDS (Tax Deducted at Source) is one of the tax collecting methods that is used in India. It is managed by the Central Board of Direct Taxes (CBDT) and governed under the Indian Income Tax Act 1961. While making any purchase of the property, the buyer is liable for TDS on sale of property. As TDS is deducted at the source, it really helps to check tax evasion and relieves the taxpayer from the burden of paying taxes as a lump sum at the end of the financial year. Hence, TDS mechanism allows to reduce the financial strain for tax payers.
A buyer is liable to deduct and submit 1% of the transaction cost as TDS on sale of property under Section 194-IA of the Income Tax Act. The tax is liable if the value of property is over ₹50 lakhs. However, Section 194-IA does not specify which amount should be considered to calculate the TDS on sale of property if there is any variation between the stamp duty value and the actual sale value of the property.
- The purchaser has to deduct TDS on sale of immovable property while paying the seller, if the value of the transaction is more than ₹50 lakhs.
- The market rate of the property can be higher or lower than its stamp duty value. In such cases, the purchaser will have to calculate TDS on sale of property based on the value which is higher.
- The due date of TDS payment upon transfer of immovable property is one month from the month-end in which the deduction is being made.
- PAN number of the seller and buyer is required to make TDS on sale of property. The TAN (Tax Deduction Amount Number) is not needed for making this payment.
- The buyer can easily make the payment by using the option of e-tax payment. It can be made through the portal of net banking or going to the bank branch.
The Indian government introduced a law, wherein, the buyer of a property has to deduct tax at source. So that, the government can check the rampant use of unaccounted money in immovable property transaction. A person who is liable to make payment of specified nature to any other person has to deduct tax at source and remit the same into the account of the central government.
It means that the responsibility to deduct the TDS on sale of property would lie with the property buyer in transactions. The property seller from whose income tax has been deducted from source, would be entitled to get credit of the amount on the basis of Form 26AS or a TDS certificate issued by the property buyer.
Did You Know?
NRIs who wants to sell property that is situated in India have to pay tax on the capital gain. TDS on sale of property by NRI depends on whether it is a short term or a long term capital gain.
Rules and Regulations of TDS on Property Sale
The government of India introduced TDS on sale of property law to keep check on the extensive use of black money in immovable property transactions. According to this law, the purchaser of a property has to deduct tax at source while paying the seller for his property. However, the transactions relating to the purchase of agricultural land are not covered under this provision.
In case there are more than one buyer and the individual purchase price of each buyer is less than ₹50 lakhs, but the aggregate value of the transaction exceeds ₹50 lakhs, then the Section 194IA would be applicable and the TDS on sale of property in case of joint sellers would be required to be deducted and deposited with the government before the due date.
The PAN Card of both the seller and the buyer are mandatory to be furnished in the Form 26QB for adding the information regarding the TDS on sale of property and the sale transaction. If the seller does not furnish a PAN Card, then TDS would be deducted at 20% of the total transaction value.
It is important for the buyer as well as the seller to file an Income Tax Return in the year of purchase. Although, this is not compulsory but if the return is not filed, it may lead to the auto generated query by the income tax department.
Procedure to Pay TDS on Property Sale
The payment of TDS on sale of property can be made through Challan 26QB via online or offline mode.
To pay TDS on property sale online, follow below steps.
Step 1: Log on to the website of Tax Information Network.
Step 2: Select “Services” from the tab and click on “e-payment-pay taxes online”.
Step 3: Click on the proceed button on the tab TDS on Property (Form 26QB) and a new screen will appear.
Step 4: In that new screen, select the code 0020 if you are a corporate payer and 0021 if you are a non-corporate payer. The details like Financial year, assessment year, type of payment, will be auto-filled.
Step 5: Fill the necessary details in all other tabs like, resident/non-resident, PAN of the buyer, PAN of the seller, complete address of the property, the amount paid on words and figures, etc.
Step 6: Once all the necessary details are filled, the last tab is “payment info”. There would be two modes of payment at the bottom of the page. The modes like, e-tax payment immediately and e-tax payment on the subsequent date. You can choose the one which you prefer and click on “Proceed”.
Step 7: After you have paid the amount, the bank lets you print Challan 280 with the tick on 800. Print it out and keep it safe.
Step 8: If you want to pay offline, a receipt for Form 26QB with a unique Acknowledgement Number is generated for you. This receipt is valid for 10 days after generation. You can take this to the authorized banks along with your cheque. The bank will proceed with the online payment of Challan generation.
How to File TDS?
Here is the step-by-step process to file TDS on sale of property online.
- First, the Form 27A must be filled completely.
- Next, the tax deducted at source and the total amount that has been paid must be filed correctly in their respective forms.
- The TAN of the organization that is filing the TDS returns should be mentioned on the Form 27A.
- After that, the appropriate challan number, the mode of payment, and the details of tax must be mentioned on the TDS return. If there are any incorrect details mentioned, the TDS returns might have to be filed again.
- The 7-digit BSR must be entered to make the tallying process easy.
- The TDS returns can be submitted on the official website of the NSDL TIN. In case of all the information that have been provided are correct, a token number will be received. This acknowledgment works as a confirmation that the TDS returns have been filed successfully.
Penalties for Not Paying TDS On Property Sale
The penalty of not paying TDS on sale of property can go up to ₹1 lakh under Section 271H. To avoid such type of penalty, it is always advisable to pay TDS on sale of property along with the interest amount and any late payment fees before you receive any tax notice.
If the tax was not deducted at all, you will have to pay an interest of 1% per month, under Section 201. And if the tax was deducted but not deposited to the government, 1,5% of interest will have to be paid.
The late filling fee applicable under Section 234E is ₹200 per day. It depends on the maximum tax due. The late filling fee could be reduced, if the seller of property has already paid capital gains tax.
However, to avoid getting into such penalties, it is essential to stay on track and pay all the taxes on the time.
Word to Remember
Challan 280 is required to be used for the payment of Income taxes. This payment of income tax may be in self assessment tax, sale of property tax, advance tax or tax on distributed income.
On the TDS on sale of property, capital gains tax is required to be paid. However, there are many exemptions which can also be claimed from the capital gains tax which can reduce the tax liability. It is very important for the buyer and the seller to file an income tax return in the year of purchase. The responsibility to deduct and submit TDS lies on the property buyer not on the seller. In case of any misappropriation, the buyer will have to answer to the authorities.
Frequently Asked Questions (FAQs)
The buyer of the property needs to pay TDS on sale of property using the e-tax TDS payment option. The buyer can make the TDS payment using net banking portal or offline by visiting the authorized bank branches.
Yes, the seller of property can claim TDS on sale of property which is already deducted. To do it, the seller can easily file the income tax return online and claim TDS refund on immovable property deducted.
The buyer of the property is responsible to deduct TDS and deposit the same to the government.
Read more about TDS Refund.