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TDS on Sale of Immovable Property – Section 194IA, Form 26QB

  1. Applicability
  2. Rate of TDS and Threshold limit
  3. Time of Deduction
  4. Due date to file Form 26QB and requirements
  5. How to Pay TDS and file Form 26QB and Due date
  6. TDS Certificate in Form 16B to seller
  7. Consequences of non deduction or non payment and non filing of Form 26QB
  8. Meaning of Agricultural Land

Applicability

This section is inserted by finance act 2013 and applicable from 1st of June , 2013.

A person who is purchasing non agricultural property from a resident is required to deduct TDS @ 1% from the amount payable in this behalf. If the property value is less than Rs. 50 lakhs then TDS is not required to be deducted. The type of property doesn’t matter – house property, commercial property or industry are all covered except agricultural land.

The provisions of this section is not applicable where section 194LA regarding compulsory acquisition is applicable. If the seller is non resident or NRI then TDS is to be deducted under section 195 on basis of capital gains and not under this section.
When it comes to under construction properties, TDS will be deducted on installments paid on or after 1st June, 2013. For that, the total purchase consideration should be more Rs. 50 lakhs. There will be no tax deducted at source for installments paid before 1st June, 2013.

Rate of TDS, Threshold limit

Rate of TDS1%.

If the recipient of income doesn’t furnish his PAN to deductor then TDS is to be deducted @ 20%.

No tax is required to be deducted where the total amount of consideration is less than Rs. 50 lakhs.
When amount of consideration exceeds rs. 50 lakhs then the tds is to be deducted on the whole amount not only on the amount exceeding rs. 50 lakhs.

Time of Deduction

Tax is required to be deducted at the time of credit of such sum to the account of the payee or at the time of payment whichever is earlier. The date of registration, agreement or contract is irrelevant for deciding the time of payment of TDS.

If the purchase value is greater than Rs. 50 lakhs then TDS is to be deducted from the first instalment itself and for each and every instalment. The purchaser should not wait for the aggregate instalment amounts to exceed Rs. 50 lakh. The view that TDS is to be deducted from final instalment or after exceeding Rs. 50 lakh is not right.

If the purchaser has availed loan from a bank and bank pays directly to the seller then its also considered as a payment and TDS needs to be deducted on date of such payment to seller. The date of payment of EMI by buyer to bank is irrelevant.
In this case, it should be considered that the amount paid by bank is after tds and tds to be paid accordingly. For eg:- A bank pays Rs. 3,50,000 to the seller, so we should consider this as payment after TDS and so the gross payment will be 3,50,000/.99 = 3,53,535. So the purchaser has to pay Rs. 3,535 as TDS.

Due date to file Form 26QB and requirements

The deductor i.e the purchaser of property has to file form 26QB which is a Challan cum declaration statement within 30 days from the end of the month in which payment is made. No separate TDS return is to be filed in respect of such deduction. Manual submission of form is not allowed. (The due date for payment is 7 days till May 2016.)

As discussed earlier tds is to be deducted in each instalment and for each deduction a separate Form 26QB is to be filed.

Also Form 26QB is to be file for one buyer one seller combination. For eg if there are 1 buyer and 2 seller then 2 Form 26QB is to be filed similarly if there are 2 buyers and 2 sellers then 4 Form 26QB is to be filed (2 Forms by each buyer).

There is no requirement of obtaining Tax deduction account number (TAN) to the person who is required to deduct tax in this section. PAN of the buyer i.e the deductor is compulsory.

How to Pay TDS and file Form 26QB

Form 26QB is a challan cum declaration statement. Therefore its not possible to pay tds without filing this form and not possible to file the form without payment.

Go to https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp

There are two options for payment

  1. Form 26QB for Payment of TDS on Sale of Property
  2. Demand Payment for Payment against demand raised by CPC (TDS)

When you are paying tds without any notice then click on 1st option and the following page appears. Fill all the details and click on proceed. It will take you to bank site and make payment.

form 26qb

See the complete procedure of filing form 26QB on Incometaxindia.com.

TDS Certificate in Form 16B to seller

The buyer has to provide TDS certificate in form 16B to the seller within 15 days from the day of filing Form 26QB. The form has to be downloaded form the website of traces. Form 16B is to be downloaded by the deductor from www.tdscpc.gov.in and given to the seller of the property within 15 days from the date of filing of form 26QB.

How to Download Form 16B

  1. Register & login on TRACES portal ( www.tdscpc.gov.in) as taxpayer using your PAN.
  2. Select “Form 16B (For Buyer)” under “Downloads” menu.
  3. Enter the details pertaining to the property transaction for which Form 16B is to be requested. Enter the Assessment Year, Acknowledgment Number, PAN of Seller and click on “Proceed”.
  4. A confirmation screen will appear. Click on “Submit Request” to proceed.
  5. A success message on submission of download request will appear. Please note the request number to search for the download request.
  6. Click on “Requested Downloads” to download the requested files.
  7. Search for the request with request number. Select the request row and click on “HTTP download” button.

Consequences of non deduction or non payment and non filing of Form 26QB

  • Interest for TDS not deducted
    Interest at the rate of 1% per month or part thereof, for the period from the date on which TDS is deductible/collectible to the date on which TDS/TCS is actually deducted/collected.
  • Interest for TDS deducted but not paid 
    Interest at the rate of 1.5% per month or part thereof, for the period from the date on which TDS is actually deducted/collected to the date on which such TDS/TCS is actually paid.

Calendar month is considered in calculating interest therefore if you delay payment by one day, you have to pay interest for two months. For example, if TDS is deducted in month of July and deposited on 8th of August then you have to pay interest for 2 month i.e. July and August. Total interest payable shall be 3%.

  • Penalty for late filing of Form 26QB
    Along with the interest penalty is also payable at the rate of Rs. 200 per day for which the default continues. The penalty amount cannot exceed the amount of TDS to be deducted.  And if the default continues for a period of more than one year then additional penalty of Rs. 10,000 to 1,00,000 is to be paid under section 271H. Amount of such penalty is to be calculated by the Assessing officer.

You can calculate interest on late payment using our TDS Late Payment Interest Calculator.

Meaning of Agricultural Land

A land is not treated as agricultural land if:

  • It is situated within jurisdiction of Municipality or Cantonment Board which has a population of not less than 10,000 or
  • It is situated in any area within below given distance measured aerially:
Population of the Municipality Distance from Municipal limit or Cantonment Board
More than 10,000 but does not exceed 1,00,000 Within 2 kms
More than 1,00,000 but does not exceed 10,00,000 Within 6 kms
Exceeding 10,00,000 Within 8 kms

Traces helpline No. –  18001030344, 0120-4814600

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