Section 194IA - How to File TDS on Sale of Property

Under section 194-IA, a buyer buying any immovable property like house, apartment, building, land (except agricultural land) must deduct Tax Deducted at Source (TDS) on the payments made to the seller of the property. The amount of TDS deducted is 1% of the sales consideration or the stamp duty value, whichever is higher. After deducting the TDS, the buyer needs to pay it to the government along with Form 26QB. Form 26QB is a challan cum return statement filed by the buyer within 30 days of the last date of month in which TDS is deducted.

Requirements of Section 194IA

When a buyer buys immovable property (i.e. a building or part of a building or any land other than agricultural land) costing more than Rs 50 lakhs, he has to deduct tax at source (TDS) when he pays the seller. This has been laid out in Section 194-IA of the Income Tax Act since 1st June 2013.

• The buyer has to deduct TDS at 1% of the total sale amount. Please note, the buyer is required to deduct TDS, not the seller
• TDS is required to be deducted only if total purchase value is Rs 50 lakh or more
• If the payment is made by instalments, then TDS has to be deducted on each instalment paid.
• ‘Consideration for immovable’ property shall include 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. This is applicable for immovable property purchased on or after 1 September 2019.
• TDS is to be paid on the entire purchase value.   
  Example for TDS on Sale of Property, if you have bought a house at Rs 55lakh, you have to pay TDS on Rs 55 lakh and not on Rs 5 lakh (i.e. Rs 55 lakh – Rs 50 lakh). This is applicable even when there is more than 1 buyer or seller. Post the budget 2019 amendment to section 194-IA, in the above example, if on 1 September 2019, you have paid Rs 2 lakh towards parking fee, Rs 1 lakh for water facility fee and Rs 1 lakh for electricity fee, your sale consideration would be Rs 59 lakh (55+2+1+1). You will have to pay TDS on Rs 59 lakh @ 1%. Your TDS payable would be Rs 59,000. 
• Buyer of the property need not obtain a TAN (Tax Deduction Account Number) for depositing TDS with the government. You can make the payment using your PAN.
• For the purpose of depositing TDS, buyer will have to obtain the PAN of the seller, else TDS must be deducted at 20%.
• TDS is deducted at the time of payment (including instalment payments) to the seller

What is Form 26QB?

Form 26QB is the challan cum statement filed by the buyer of immovable property except agricultural land to the government providing details of the buyer, seller and the total value of sale consideration.

• The TDS on the immovable property has to be paid using Form 26QB within 30 days from the end of the month in which TDS was deducted.
• After depositing TDS through e-tax Payment option (Netbanking) or any of the authorised bank branches.to the government, the buyer is required to furnish the TDS certificate in form 16B to the seller. This is available around 10-15 days after depositing the TDS. The buyer is required to obtain Form 16B and issues the form to the seller. You can check the procedure to generate and download Form16B from TRACES (TDS Reconciliation Analysis and Correction Enabling System) here.
• PAN of the seller, as well as Purchaser, should be mandatorily furnished in an online form (Form 26QB) for furnishing information regarding the property transaction. Facility for furnishing information regarding the transaction of sale of immovable property and payment of TDS thereof is available on the website www.tin-nsdl.com (http://www.tin-nsdl.com/).

Penalty for Non-filing Form 26QB

If the buyer doesn’t furnish the form 26QB to the Income Tax department, the following penalties can be imposed on the buyer:

• A late fee of Rs 200 per day from the date exceeding the deadline date. The late fee must be submitted before filing the delayed Form 26QB.
• The amount of fee cannot be more than the total amount deducted.
• If the TDS is not deducted, the buyer has to pay interest of 1% per month or part of the month starting from the date till which TDS is supposed to be deducted to the date of TDS deducted.
• If the TDS is deducted, but not paid to the government, the buyer has to pay the interest of 1.5% per month or part of the month starting from the date on which TDS is deducted to the date of payment to the government.
• If the buyer does not submit Form 26QB or furnish incorrect details in Form 26QB, the penalty imposed on buyer can range from Rs 10,000 to Rs 1,00,000. This buyer doesn’t have to pay this penalty if he has submitted Form 26QB within 1 month of the deadline or have deposited the TCS amont, interest and late fee with the government.

Consequences of Non-filing of Form 26QB to the Seller

If the buyer doesn’t file Form 26QB, the seller cannot claim TDS amount while filing his Income Tax Return as it will not reflect in Form 26AS. It may lead to paying tax again for the same amount by the seller. Also, while reporting capital gain for the financial year, the seller cannot claim the TDS credit and has to pay again to the Income Tax department.

How to Pay TDS on Property Purchase through Challan 26QB and Get Form 16B

The steps to pay TDS through challan 26QB and to obtain Form 16B (for the seller) are as follows:

e-Payment through Challan 26QB (Online)

Step 1: Log in to your account on the Income Tax e-filing portal. Select e-File > click on e-Pay Tax from the dropdown as shown below

Step 2: Click on ‘+ New Payment’

Step 3: Click on the proceed button on the tab ‘26QB- TDS on Property’ as highlighted below

Note: In the next few steps, you will have to add the following details:

• Add Buyer's Details
• Add Seller's Details
• Add Property Transferred Details
• Add Payment Details 

Step 4: Add Buyer's Details

All your details will be auto-filled, but you can also change them if needed. After entering the details, click on ‘Continue’

Step 5: Add Seller's Details

Add all the details of the Seller like their PAN, address

Step 6: Add Property Details

Add all the property details like type, address and also the sale details like date of agreement, value etc. The tax amount will be calculated automatically. Once done, click on ‘continue’

Step 7: Add Payment Details

Select the payment mode and proceed to complete the payment. Once the payment is done, a challan will be generated.

Step 8: Register in TRACES 

• If you are a first-time user, register on TRACES as a Tax Payer with your PAN and the Challan details of the tax payment.
• Once you register, you will be able to obtain approved Form 16B (TDS certificate) and you can issue this Form to the Seller.
• Check your Form 26AS seven days after payment. You will see that your payment is reflected under “Details of Tax Deducted at Source on Sale of Immovable Property u/s 194(IA) [For Buyer of Property]”.
• Part F gives you details such as TDS certificate number (which TRACES generates), name and PAN of deductee, transaction date and amount, acknowledgement number (which is the same as the one on your Form 26QB), date of deposit and TDS deposited.

Step 9: Download your Form 16B

• After your payment in Form 26AS has been reflected, log in to TRACES. Go to the Download tab at the tab and click on “Form-16B (for the buyer)”.
• To finish this process, fill PAN of the seller and acknowledgement number details pertaining to the property transaction and click on “Proceed”.
• Verify all the details once and click on “Submit a request”
• After a few hours, your request will be processed. Click on the Downloads tab and select Requested Downloads from the drop-down menu.
• You should be able to see that the status of your Form 16B download request is ‘available‘.
• If the status says ‘submitted‘ wait for a few hours more before repeating the last step.
• Download the ‘.zip file’. The password to open the ‘.zip file’ is the date of birth of the deductor (the format is DDMMYYYY). Your form will be available inside the .zip file as a pdf. Print this out.

Notice for Non-filing Form 26QB

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.

Sample Notice Received by the Taxpayer

Sub: CPC (TDS)  
Follow up: 26QB Statement not yet filed for Purchase of Property during FY 2013-14  
Date of communication: 05/04/2016  
Dear Buyer of Immovable Property,   
PAN(XXXXX1234X),

As per the information received in the Annual Information return (AIR) through Registrar/Sub-registrar, you have executed a transaction for the purchase of immovable property exceeding Rs.50 Lakhs (Rupees Fifty Lakhs) during Financial Year 2023-24.  
However, TDS Statement in Form 26QB has not yet been filed by you. In this regard, your urgent attention is invited to the following, with respect to the filing of the TDS Statement in Form 26QB and Issuance of TDS Certificates in Form 16B downloaded from TRACES.