Section 194 IA: TDS on Sale Immovable Property

When a person buys an Immovable Property such as building, part of a building land etc, (except agricultural land) then TDS is deducted while making the payment to the seller from 1st June 2013 according to section 194 1A of the Income Tax Act.

Tax Deducted at Source (TDS) is tax collected by the government under the Income Tax Act, 1961. It is controlled by the Central Board of Direct Taxes (CBDT). TDS is a method of ‘pay as and when you earn’.

Provisions

  • TDS is deducted by the buyer (not by the seller) at 1% of the total sales.
  • If the sale is for less than Rs. 50lakhs then TDS will not be deducted.
  • If payment of the sale of the property is in installments, then TDS is also deducted in installments.
  • Joint Ownership of Property: If there are 2 or more buyers and property costs Rs. 70lakh is being divided between them as Rs. 35lakh each, then TDS is still applicable. TDS is deducted on the total cost of the property and not an individual expenditure.
  • The seller has to provide their PAN card otherwise; a deduction of 20% TDS is applicable.
  • TDS is deducted either
  1. At the time of payment or;
  2. at the time of giving credit to the seller, whichever is earlier.
  • The TDS is deposited along with Form 26QB within 7 days from the end of the month (in which TDS is deducted).
  • The buyer has to present the TDS certificate to the seller after depositing the TDS to the government. TDS certificate is issued in 10-15 days after the submission of TDS.
  • For paying TDS,
  1. Seller requires Form 16B.
  2. Buyer requires Form 26QB.

Steps to file TDS Return (Through Net Banking)

Form 26QB for Buyer

  • Log in to TIN NSDL website (www.tin-nsdl.com).
  • Under ‘TDS on sale of property’ and click on ‘Online form for furnishing TDS on the property (Form 26QB)’.
  • Select the challan applicable as ‘TDS on Sale of Property’.
  • Fill the complete form and submit. Save the unique acknowledgment number. Also, click on ‘submit to the bank’ to make required payment online through internet banking.
  • After the payment is made, a challan receipt will appear containing CIN, payment details and bank name. This receipt is the proof that payment is made.

Documents required

  • PAN of the seller & buyer
  • Details of both seller & buyer
  • Property details
  • Amount paid/credited & tax deposit details

 Form 16B for seller

  • Register & login on TRACES portal (www.tdscpc.gov.in) as a taxpayer using PAN.
  • Under the ‘Downloads’ menu, select “Form 16B”.
  • Enter the details related to property transaction like the assessment year, acknowledgment number, PAN of the seller and proceed.
  • After proceeding, then click on “Submit Request”.
  • Click on “Requested Downloads” to download the requested files.

Steps to file TDS Return (Through Banks)

When TDS is deposit through cheque/demand draft, then the best way is Banks.

  • After filling Form 26QB online, mention the payment mode through bank branches.
  • Take a print out of the filled-up Form 26QB and the acknowledgment slip.
  • Check the authorized banks and visit the nearest bank branch.
  • Give the acknowledgment slip to the bank. If is suggested that, visit that branch in which your account is operated. Then the bank will do the online transaction to the IT Department.
  • Otherwise, deposit the cheque/demand draft to the bank and the bank will make the online transaction.
  • Once online payment is done, a challan receipt is received as a confirmation of your tax payment.

Time limit and Penalty

Time limit: The tax amount has to be paid to the government within 7 days of the transaction, whether in installments or full payment.

Penalty: The penalty for not paying TDS on the immovable property can be up to Rs. 1 lakh under Section 271H.

Avoid the penalty by paying the TDS, interest amount and late payment fee as soon as you notice is received. Under Section 201, you are liable to pay

  • The interest of 1% per month u/s 201 if the tax is not deducted.
  • 5% interest per month, if the tax was deducted but is not paid to the Government.
  • The late filing fee is 200 per day depending on the maximum tax due under Section 234E.
  • If the seller has already paid capital gains tax, the late filing fee can be reduced or cut off altogether.

Exceptions under this section

Section 194 IA is not applicable if payment is made by a Non-Resident Indian (NRI). The above transactions come under the purview of section 195 of the Income-tax Act. Hence, the upper limit is not applicable here. Also, TDS here will be deducted as per rate prescribed on the sale consideration. The surcharge is also applicable @ 10% if amount paid exceeds Rs. 1crore. It is important to consider the DTAA provisions of the relevant country if any.

In case you are confused about TDS Return Filing as a deductor, feel free to consult the experts at LegalRaasta. You can get comprehensive assistance with our TDS Return Filing Software which supports TDS on Salary payments (Form 24Q), Rent, Interest, Commission and other Non-salary transactions (Form 26Q), NRI (Form 27Q)and TCS (Form 27EQ).