Tax deduction at source (TDS) on property is one of the most commonly forgotten statutory payments while buying property. A large number of home buyers are not even aware of this requirement. Today’s article is to bring to your attention this statutory payment which has to be paid, failing which the tax has to be paid along with the fine.
TDS rules on property purchase
- As per Income tax act, if the value of the property exceeds Rs 50 lakhs, the buyer is required to deduct TDS at 1% of the total consideration amount when he pays the seller.
- Consideration for immovable’ property includes all charges like nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to the transfer of the immovable property.
- TDS on property applies to purchase of residential and commercial properties.
- The buyer of the property is responsible for deducting TDS at the specified rate at the time of making payment to the seller.
- The deducted amount must be remitted to the government within of seven days from the end of the month in which the deduction is made.
- Buyer of property can make the payment using PAN.
- TDS has to be paid using Form 26QB within 30 days from the end of the month in which TDS was deducted.
- The buyer has to furnish the TDS certificate in form 16B to the seller.
How to pay TDS and obtain Form 16B
- Login into the income tax portal. Select e-File > click on e-Pay Tax from the dropdown.
- Select ‘new payment’.
- Click on the proceed button on the tab ‘26QB- TDS on Property’
- Add ‘buyer details’. Most of them will be auto-filled but you can also edit the details if needed. Click on ‘continue’.
- Add ‘seller details’ like PAN, address etc and click on ‘continue’
- Add ‘property details’ like type, address and sales details like agreement date, sale value. The tax amount will be automatically calculated. Once done, click on ‘continue’.
- Add ‘payment details’. Select the payment details and complete the payment. A challan will be generated once payment is complete.
- Then register in TRACES using your PAN and challan number. After registration on TRACES, you will be able to obtain form 16B and issue it to the seller.
- Check your Form 26AS seven days after payment. The payment will be reflected under “Details of Tax Deducted at Source on Sale of Immovable Property u/s 194(IA) (For Buyer of Property).
- After the payment is reflected in Form 26AS, log in to TRACES. Click on Download tab and then click on Form-16B (for the buyer).
- Fill PAN of the seller and acknowledgement number details pertaining to the property transaction and click on ‘Proceed’.
- Verify the details and then click on ‘Submit request’.
- The request will be processed after a few hours. Then click on downloads tab and select Requested Downloads from the drop-down menu. You would see that your Form 16B download request is ‘available‘.
Non payment and non filing of Form 26-QB
- The income tax department receives an Annual Information Return (AIR) from the registrar/sub-registrar office regarding the purchase and sale of property regularly.
- From this report, the department can figure out if you have made a property transaction exceeding Rs.50 lakh.
- If the buyer has not deducted tax at source at 1% of the transaction amount or not filed TDS within the specified time, the IT department will send a notice to the buyer.
- In case of non payment/late filing of form 26-QB, the buyer is liable to pay, a sum of Rs. 200 (two hundred) for every day during which such failure continues. The buyer also has to pay fines related to Late Deduction, Late Payment and Interest thereon. Penalty may also be levied on him.
- The seller will not be able to claim TDS credit in case of non/ late filing of Form 26QB and may also end up paying additional tax in the process.
Always ensure you pay TDS when you buy property. It is an important statutory payment which if not done in time can lead to levy of penalties and fines.
