02 Sep TDS on purchase of property | Form 26 QB filing | Section -194IA
Posted at 12:46h
in Income Tax
When purchasing immovable property (such as a building, part of a building, or land, excluding agricultural land) where the sale consideration exceeds ₹50 lakh, the buyer must deduct tax at source (TDS) at the time of payment to the seller.
Let us understand the key points
- TDS Rate: The buyer is required to deduct TDS at 1% of the total sale value.
- Threshold: TDS is applicable only if the total purchase value exceeds ₹50 lakh.
- Installment Payments: If the payment is made in installments (common in under-construction properties), TDS must be deducted on each installment paid.
- Inclusive Consideration: The sale consideration includes all additional charges like club membership fees, car parking fees, electricity or water facility fees, maintenance charges, advance fees, or any other charges incidental to the transfer of the property.
- TDS on Full Amount: Importantly, TDS is calculated on the entire purchase value, not just the amount exceeding ₹50 lakh. For example, if the property is purchased for ₹65 lakh, TDS must be deducted on ₹65 lakh, not just on ₹15 lakh (i.e., ₹65 lakh minus ₹50 lakh). This applies even if there is more than one buyer or seller.
- No TAN Requirement: If the seller is a resident of India, the buyer is not required to obtain a Tax Deduction Account Number (TAN) to deposit the TDS.
- PAN Requirement: The buyer must obtain the seller’s valid PAN for TDS deposit. Without the seller’s PAN, TDS must be deducted at a rate of 20%.
- Timing of TDS Deduction: TDS should be deducted at the time of payment to the seller, including installment payments.
- Form 26 QB : Form 26QB is a challan cum return statement that is required to file for the deposit of TDS on the property.
- Payment of TDS: The TDS must be paid to the government using Form 26QB within 30 days from the end of the month in which the TDS was deducted.
- Issuance of TDS Certificate: After depositing the TDS, the buyer must furnish the TDS certificate (Form 16B) to the seller. Form 16B can be obtained from the TRACES portal within 7-10 days after the TDS payment.
Consequences of Non/Late Filing of TDS Statements
For Buyer of Property:
- Late Filing Penalty: If Form 26QB is not filed on time, a fee under Section 234E of the Income Tax Act will be levied. The buyer will incur a late fee of ₹200 per day for each day the default continues.
- Additional Penalties: The buyer may also be liable for penalties related to late deduction, late payment, and interest thereon. A penalty under Section 271H may also be imposed by the Assessing Officer.
For Seller of Property:
- TDS Credit: The seller will not be able to claim TDS credit if Form 26QB is not filed or is filed late.
Penalties/Late Fees/Interest on Non-Filing of Form 26QB
- Non-Deduction of TDS: If TDS is not deducted, the penalty is 1% per month from the due date of deduction until the actual deduction.
- Non-Payment of TDS: If TDS is deducted but not paid to the government, the penalty is 1.5% per month from the date of deduction until the date of payment to the government.
- Late Submission of Form 26QB: If Form 26QB is not submitted or is delayed, a fine under Section 234E may be imposed at ₹200 per day until the form is submitted. This fine is in addition to any interest accrued.
You can also refer to a popular, old but relevant video of Miss Rounak Jain to understand the TDS on purchase of Property. Click on the image
