TDS on Sale of Immovable Property

According to the Finance Act, 2013 TDS shall apply on the sale of immovable property @ 1% on all immovable property transactions wherein transaction value is equal to or greater than Rs. 50 Lakhs.
The main intention of the Government to introduce this section was to cover all those sale transactions of immovable property which are undervalued and under-reported and don’t even carry the PAN Card No. of the parties concerned. But, the finance minister has specifically stated that sale of Agricultural Land would be exempted from this section.
For the purpose of this section, meaning of immovable property shall be any land or any building or a part of a building. It shall include flat/ building/vacant plot whether it is a residential/ commercial/ industrial property. TDS is to be deducted on all types of property transactions except Agricultural Land.
 

1. Calculation of Amount on which TDS is to be deducted:
TDS  is to be deducted on the total amount paid to the seller excluding GST. Example No. 1 of calculation follows below:
Transaction value for purchase of property= Rs. 80 Lakhs
GST on above property(if property is under-construction)=  Rs. 9.6 lakhs
Total amount to be paid= Rs. 89.6 Lakhs.
TDS would be deducted on Rs. 80 lakhs @ 1%, which would be Rs. 80,000
Note: The buyer cannot apply for lower deduction of TDS in this section, flat rate of 1% is applicable for every case.
 

Example No. 2: TDS to be deducted at the time of each instalment
Transaction value on which TDS to be deducted= Rs. 1 crore
Installment No. 1= Rs. 25 lakhs; tds to be deducted= 25lakhs*1%= Rs. 25000
Installment No.2= Rs. 25 lakhs; tds to be deducted= Rs. 25000
Installment No. 3= Rs. 30 lakhs; tds to be deducted= Rs. 30000
Installment No. 4= Rs. 20 Lakhs; tds to be deducted= Rs. 20000

2. Procedure to deposit TDS with the Government
(A) The most important point which is to be kept in mind is that the buyer of the property has to deduct the TDS and deposit it with the Government, not the seller. To remove any hardship to the buyer, it is not mandatory for the buyer to have a TAN (Tax Deduction Account) Number to give effect to this transaction.
(B) The seller of the property has to provide PAN or else TDS shall be deducted @ 20%. PAN of the buyer is also mandatory.
(C) TDS is deducted at the time of payment or at the time of giving credit to the seller, whichever is earlier. TDS would be deducted at the time of paying each instalment.
(D) The TDS deducted by the buyer at the time of making payment to the seller has to be deposited with the Government within a period of 30 days from the end of the month in which deduction has been made. Eg. If TDS has been deducted in the month of April, it should be deposited before 30^th May with the Government.
(E) All the details regarding the transaction and TDS on property are required to be furnished in Form 26QB. This form cannot be submitted manually and can be furnished online only.
However, the payment can be made either physically through bank or online mode also.
(F) After depositing the TDS, the buyer would be required to issue Form 16B to the seller in respect of the property. Form 16B can be downloaded from the website of the centralised processing cell of TDS (CPC-TDS) i.e. www.tdscpc.gov.in after 15 days from the end of the month in which the payment has been made.

Steps to fill form 26QB:
1. Go to TIN NSDL website (www.tin-nsdl.com)
2. Under TDS on sale of property, click on “Online form for furnishing TDS on property (Form 26QB)”.
3. Select the applicable challan as “TDS on sale of property”.
4. Fill the complete form as applicable.
(User should be ready with the following information while filing 26QB):
1. PAN of the seller and the buyer.
2. Communication details of the buyer and the seller.
3. Property details
4. Amount paid/credited and tax deposited.
5. After submitting the form, confirm and print form 26QB and submit to the bank. A unique acknowledgment is displayed, which is advisable to save for the future use.
Click on Submit to the bank to make online payment or manual procedure is also possible.
6. On successful payment a challan counterfoil will be displayed containing CIN , indicating proof of payment made.

Proceed to TRACES portal (www.tdscpc.gov.in) after 5 days to download form 16B
1. Register and login on Traces portal as taxpayer using PAN.
2. Select form 16B for buyer under Downloads menu.
3. Enter the details pertaining to the transaction, and click on proceed.
4. Click on submit request to proceed.
5. A success message on submission of download request will appear. Please note the request number.
6. Click on Requested Downloads to download the requested files.
7. Search for the request number and select the request row and click on HTTP download button.

Some important points:
1. In case of more than 1 Buyer/ 1 Seller, Form 26QB has to be filed separately for each buyer-seller combination.
2. It is important for both the buyer and the seller to file an income tax return in the year of purchase to avoid generation of the income tax notice.
3. It is always advisable to mention the details of the TDS deducted in the Sale Agreement.
 

Penalty for Non-Deduction/Deposit of TDS on Property
1. Interest on Late deposit of TDS on property- In case TDS has not been deducted, the buyer would be required to pay 1% interest per month on the amount not deducted. In case, TDS has been deducted but has not been paid, Interest @ 1.5% per month would be charged.
2.  Penalty for late deposit of TDS- The Income tax officer may levy penalty upto Rs. 1 lakh for late deposit.
3. Penalty for late filing of Form 26QB- Penalty of Rs. 200 per day shall be levied not exceeding the amount of TDS for which form has not been filed.