Any person or HUF purchasing an immovable property worth more than Rs. 50 lakh must deduct TDS @1%. when paying the seller. The TDS amount is paid to the government by filing Form 26QB in under 30 days from the month’s end for which the TDS deduction was initiated.
For all immovable house properties, commercial property and unconstructed properties except agricultural land. TDS needs to be deducted only on the transactions where sale proceeds are Rs.50,00,000 (Fifty Lakhs) or more.
When and how much TDS shall be deducted on the Sale of the Property?
TDS is to be deducted from the stamp duty value of the property if it is more than the sale value. Also, if the value of the property exceeds ₹50 lakhs, the TDS is deducted on the entire amount and not just on the amount over and above ₹50 lakhs. For example, if Mr. B purchased a property from Mr. S for a sum of ₹60 Lacs, but the stamp duty value of such property is ₹65 Lacs. In this example, the TDS will be calculated on ₹65 lakhs and not on ₹15 lakhs (65,00,000 - 50,00,000). Under the new amendment, a TDS of 1% will be calculated and deducted on a total of ₹65 Lacs, i.e., 65,000/-, and Mr. B will be paid ₹59.35 Lacs.
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When buying or selling immovable property such as land or buildings, the following rules must be followed:
TDS Deduction:
- Buyers must deduct TDS at 1% of the sale value of the immovable property at the time of the transaction.
- No TDS deduction is required if the property's sale price is below ₹50 lakh.
No TAN Required:
- Buyers are not required to obtain a Tax Deduction Account Number (TAN) to deduct and deposit TDS.
- However, the PAN details of both the buyer and the seller must be provided during the TDS deduction process.
Multiple Buyers and Sellers:
- If there are multiple buyers or sellers involved, separate Form 26QB must be filed for each buyer-seller combination.
Installment Payments:
- For transactions involving payment in installments, TDS must be deducted on a pro-rata basis with each installment.
TDS Certificate:
- After deducting and depositing TDS, the buyer must issue Form 16B (TDS certificate) to the seller within 15 days of making the TDS payment.
- If there are multiple buyers, each buyer must deduct and pay TDS equally at the same rate.
Agricultural Land Exemption:
- TDS is not applicable on the purchase of agricultural land, except in specific cases where the land does not qualify as agricultural due to its location.
Non-Agricultural Land Criteria:
A land is not considered agricultural if it meets the following conditions:
- It is located within a population of over 10,000 and falls under the jurisdiction of a Cantonment Board or Municipality.
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It is situated within the specified distances from municipal limits, depending on the population:
- Up to 2 km for a population of 10,000 to 1,00,000.
- Up to 6 km for a population of 1,00,000 to 10,00,000.
- Up to 8 km for a population exceeding 10,00,000.
The below process can be used to fill out form 26QB, from generating form 26QB to making payment online.:
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Step 1: Go to the official Income Tax website and log in to your account.
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Step 2: Navigate to the 'E-file' section, select 'e-pay Tax,' and then click the 'Proceed' button for '26QB (TDS on sale of the property)' in the 'New payment' section.
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Step 3: Fill - the necessary information, including buyer and seller basic details, property details, tax deposit details, the amount credited or paid, address details, and communication/contact details, as well as the residential status of the seller.
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Step 4: After payment challan will be downloaded.
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Step 5: Once Form 26QB is processed, you can generate the TDS Certificate from the TRACES Portal by logging in as a Tax Payer.
To learn how to download Form 26QB, follow these steps:
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Step 1: Go to the official Income Tax Website and log in. Then select 'e-file' followed by 'e-pay taxes.'
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Step 2: Choose 'Payment history.' If Form 26QB has already been filed, you will find an entry under the type of payment labeled 'TDS on Sale of Property (800)'. Under 'Action,' you will see the option to download the receipt or statement of Form 26QB.
Here's a sample of Form 26QB statement for your reference.
Where can the TDS Deducted on the Property be Seen by the Seller?
TDS deducted will be reflected in Form 26AS Part F, as shown in the image:
| SL No. |
Reason for Penalty |
Penalty Charges |
| 1 |
Delay in Filing TDS |
₹200 per day of delay, as per Section 234E. |
| 2 |
Failure to Remit TDS After Deduction |
1.5% interest per month on the unpaid TDS amount until remitted to the government. |
| 3 |
Non-Deduction of TDS |
1% interest per month on the TDS amount not deducted. |
| 4 |
Non-Submission of the Required Statement Within Stipulated Time |
A penalty between ₹10,000 and ₹1 lakh under Section 271H. However, no penalty applies if TDS, fees, interest, and the required statement are submitted within a specified time. |
Things to Remember by Seller of the Property
If you're selling a property, ensure the following:
- Provide Your PAN: Share your PAN with the purchaser to enable proper reporting of TDS (Tax Deducted at Source) to the Income Tax Department.
- Verify TDS in Form 26AS: Confirm that the taxes deducted by the purchaser are accurately reflected in your Form 26AS.
Things to Remember by Purchaser of the Property
If you're purchasing a property, keep the following points in mind:
- Deduct TDS at 1%: Deduct 1% tax from the total sale consideration before making the payment.
- Collect and Verify Seller’s PAN: Ensure the seller's PAN is valid and accurate before proceeding.
- Submit PAN Details Online: Provide both the purchaser's and seller's PAN correctly in the online TDS filing form.
- Avoid PAN Errors: Double-check PAN details to prevent mistakes. For any corrections, promptly contact the Income Tax Department.
If you are the seller who has deducted TDS, you need to file a TDS return. The deductors should file a TDS return on time to avoid penalties. Tax2win’s tax experts can help you file TDS returns accurately and ensure a smooth tax filing journey. From Tax planning to tax-filing, our experts provide end-to-end tax solutions for your needs. Book eCA consultation Now!
