The Government of India, in a bid to curb the widespread use of black money in immovable property transactions, has legislated a bill, wherein, the buyer of a property has to deduct TDS on properties while paying to the seller.
The Properties That Are Covered
The TDS law, under Section 194IA of Income Tax Act, requires the purchaser of a property to deduct tax at the rate of 1 percent on the total transaction value if the sale consideration is 50 lakh rupees or above. However, all transactions appertaining to the purchase of agricultural land, are exempted from this provision.
How to Pay the TDS on Properties and When to Deduct It
The buyer of the property will have to deduct the TDS either at the time of administering the conveyance deed or at the time of paying the advance, in case an advance amount is being provided prior to the execution of the conveyance deed.
In the case of buying properties under construction, the buyer needs to deduct TDS on payment of every instalment.
The property purchaser needs to deposit the tax deducted at source to the credit of the union government within thirty days from the deduction of the tax. The buyer, to pay the TDS and furnish other particulars, will have to fill in the Form-cum-challan No 26QB.
In certain scenarios, where there is more than one buyer, the buyers need to provide separate Form 26QB for each representative. The same is applicable to sellers as well. All necessary details relating to the buyers and sellers will have to be tendered in discrete Form 26QB.
Details Required for TDS Payment
It is solely the purchaser’s responsibility to comply with the provision of deducting the TDS on properties, and paying the same to the central government. Complete instructions related to payment of tax and filing of Form 26QB can be found at – http://www.incometaxindia.gov.in/Pages/tds-sale-of-immovable-property.aspx
Ideally, any person or company deducting TDS has to obtain a Tax Deduction Account Number (TAN). However, in case of deducting TDS on immovable property, the homebuyer won’t need to obtain a TAN. Providing details like email id, mobile number, PAN, and address of both buyer and seller in the Form 26QB will suffice. Full address of the property, along with the total value of consideration, date of the agreement, and the payment date will have to be provided as well.
Property buyers can pay the TDS online, or through an offline window, by submitting a physical challan to any authorized bank. Subsequently, the bank will update the details of TDS filing on the website of income tax department. Once the filing of TDS is done, the buyer has to download the TDS certificate in Form 16B and furnish it to the seller within 15 days.
The intent of the income tax department, which is under the central government, is to ensure that there is no evasion of tax. In case the buyer fails to provide the Form 16B within 15 days, and taxes are already paid by the seller, the buyer has to submit Form 26A and request that late filing fee under Section 234E is not imposed. Though this might save the late penalty, interest under Section 201 will be still applicable.
Property buyers should make it a point to issue Form 16B, otherwise, it won’t be possible for the seller to claim the tax credit for the TDS deducted. Late filing or non-filing of Form 26QB will attract penalties as per the present income tax provisions. Finally, there’s something for homebuyers to rejoice, as stamp duty and registration fees won’t require the filing of TDS.