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.
Interest on:
Calculation
Not deducting TDS
1% per month from the date on which you were supposed to deduct TDS until the day on which you actually deduct TDS.
Not depositing the TDS with the government
1.5% per month from the date on which TDS is deducted to the date of payment to government.
Late filing fee:
Calculation
Late filing fee under section 234E @ Rs 200 per day
If you do not submit or delay in submitting Form 26QB, you may have to pay a fine under section 234E. The fine is Rs. 200 per day until you submit Form 26QB. This is in addition to the interest amount mentioned above.
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.
The Finance Bill 2013 has proposed that the purchaser of an immovable property (other than rural agricultural land) worth ` 50 lahks or more is required to deduct TDS at the rate of 1% from the consideration payable to a resident transferor.
Who is responsible for deducting TDS on the sale of the property?
The buyer of the property is liable to deduct TDS and deposit the same to the government.
I am a buyer of the property, do I require to obtain TAN to deduct TDS on sale of property?
Buyer or Purchaser of the property is not required to procure Tax Deduction Account Number (TAN). All that is required is the buyer’s and sellers PAN to report the TDS.
What if I don’t have seller's PAN to deduct TDS on property sale?
The seller's PAN is mandatory to obtain. If the PAN is not available, TDS is to be made @ 20% of the purchase value, and then the seller will not get the credit of the TDS amount.
How are transactions of joint parties filed in Form 26QB?
Each buyer must fill out the Form 26QB challan for each unique buyer-seller combination for their respective share. For example, if there is one buyer and two sellers, two forms must be filled in. Similarly, if there are two buyers and two sellers, then four forms must be filled in.
I am a buyer. Should I deduct TDS on the amount exceeding the property value of Rs 50 lakh or the entire amount I bought the property?
TDS has to be deducted by the buyer on the entire amount that is paid or credited to the seller when the amount exceeds Rs 50 lakh. For example, if a property is bought for Rs 70 lakh then TDS has to be deducted on the entire amount–that is Rs 70 lakh, not on Rs. 50 lakhs or on just the Rs 20 lakh that exceeds the Rs 50 lakh threshold.
I am a buyer. How do I procure TAN to report the TDS on the sale of the property?
TAN is the Tax Deduction Account Number. Neither the buyer nor the seller is required to procure the TAN for making TDS payment on the purchase of the immovable property. However, the buyer must quote their PAN and the seller(s)’s PAN while deducting TDS on the purchase transaction.
Do I have to file Form 26QB if the payment and registration of the property was done before May 2013?
Form 26QB is applicable on the purchase of properties after 1 June 2013. Hence, for properties where the formalities were completed before this date, there is no requirement to file Form 26QB.
I am the seller of the property, how can I claim the refund of TDS deducted on the sale of the property? How much refund is received?
A seller of the property can claim the TDS deducted on an immovable property at the time of filing their income tax return. In a case where a refund arises due to TDS on the sale of a property, the refund can be claimed through an ITR filing. The income tax law allows for payment of interest at 0.5% per month under section 244A to a taxpayer on the refund due on an ITR filed. In a case of an ITR filed within the due date, the interest is payable from 1 April of the assessment year till the date of refund is granted. In a case where the ITR is filed after the due date, interest is payable from the date of furnishing of ITR till the date when a refund is granted.
What is the time limit to pay TDS on a property?
The time limit to pay TDS on a property is 30 days. TDS on immovable property transfers must be paid within 30 days after the end of the month in which the deduction is made.
Can I pay 1% TDS under section 194IA for purchasing a property from an NRI?
No, the seller should be resident for TDS deduction under this section. Click here to know more on TDS on purchasing a property from an NRI.
What is the rate of TDS under Section 194-IA?
The rate of TDS under Section 194-IA is 1% if the sale value or stamp duty value of property exceeds Rs. 50 lakhs.
How to pay TDS on property purchase?
The buyer will have to file Form 26QB. Form 26QB is an online statement cum challan that is used for the payment of TDS. The buyer must furnish this form by filling out all the details of the property, details of the buyer, seller, tax deposits.
How to claim TDS on purchase of property in ITR?
The TDS deducted by the buyer on purchase of a property will be available for credit to the seller. However, the seller must have provided PAN details to the buyer inorder to claim TDS credit. The seller should also make sure that the credit is reflecting in Form 26AS.
How to pay TDS on purchase of property from NRI?
The buyer of the property is obligated to deduct TDS from the sale proceeds and deposit it with the income tax department within the specified time frame. After making the deduction, the buyer must submit the details of the deduction and payment through Form 27Q.
About the Author
Ektha Surana
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Multitasking between pouring myself coffees and poring over the ever-changing tax laws. Here, I've authored 100+ blogs on income tax and simplified complex income tax topics like the intimidating crypto tax rules, old vs new tax regime debate, changes in debt funds taxation, budget analysis and more. Some combinations I like- tax and content, finance & startups, technology & psychology, fitness & neuroscience. Read more
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