Understanding TDS on Sale of Property: A Comprehensive Guide

Tax Deduction at Source (TDS) on property sales could be one of the most important elements of the Indian Income Tax System. For both the buyers and the sellers alike comprehension of each their part under section 194IA of the Income Tax Act 1961 is of utter importance. We will go into TDS on property dealer transactions in detail, examining: Who is tasked to deduct TDS, Section 194IA provisions, TDS deduction requirements, submission of TDS certificates, form 26QB, and the penalties of noncompliance.

1. Who is liable to deduct TDS on the sale of Property?

The person buying the property is liable to deduct TDS u/s 194A of the Income Tax Act, 1961 and deposit the same with the tax department.

2. What are the provisions under section 194A of the Income Tax Act?

3. What are the other requirements of TDS deduction under Section 194A?

a) TDS on a property is to be deducted by the buyer whereas the seller can claim its credit in their tax return.
b) No TDS is required to be deducted under Section 194IA if the transaction value is less than Rs.50 lakh.
c) TDS on property must be paid on the full amount of sale consideration and not only the sum exceeding Rs.50 lakh. For example, if you buy a property with a value of Rs.55 lakh, TDS will be calculated on Rs.55 lakh and not on Rs.5 lakh.
d) For payments made in instalments, TDS will be deducted on each instalment.
e) Since September 2019, payments such as club membership, car parking, advance fees, maintenance fees, and electricity fees have also been under consideration for immovable property. It implies that such charges attached to the property will also be included in the taxable total.
f) PAN cards of buyer and seller are mandatory for deducting TDS on the sale of Property under Section 194IA.
g) If sellers don’t have PAN, the rate of TDS rises to 20%.
h) The TDS on the immovable property can only be paid using Form 26QB within 30 days from the end of the month in which the TDS was deducted. The buyer is required to obtain Form 16B from Traces and issue the same to the seller.

4. Most Important:

Issuance of TDS Certificate by providing Form 16B after its download from TRACES. All buyers must issue TDS certificates after generating and downloading the same from TRACES. The TDS Certificates can be downloaded from the TRACES Portal only.

5. What are the penalties for Non-Filing of Form 26QB?

6. Mandatory Filing of Form 26QB: –

As per the Finance Act 2013, TDS is liable to be deducted on the transfer of immovable property, if the sale consideration of the property sold exceeds or is equal to Rs 50 Lakhs. Section 194 IA of the Income Tax Act, 1961 provides that:
a) For all such transactions with effect from June 1, 2013, Tax @ 1% should be deducted by the purchaser of the property while making payment of the sale consideration.
b) The TDS so deducted must deposited to the Government Account.
c) The PAN of the seller, as well as the buyer, should be mandatorily furnished in an online form (Form 26QB) while furnishing information regarding the property transaction.
d) A TDS certificate in Form 16B needs to be issued by the Buyer of the property to the Seller, as proof of the taxes deducted and deposited into the Government Account.

Taxcellent helps you in filing Form 26QB and depositing the TDS on the sale of a property. The taxcellent team also assist you in Online Income Tax Return Filing in Delhi and claiming credit of TDS deducted by the buyer of such property. Taxcellent also assist you in issuing Form 16 within due timelines.

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