Last modified: 22 June 2016

TDS on Sale of Immovable Property

The Finance Minister in his budget speech for 2013-14 introduced TDS on Sale of Immovable Property transactions of over Rs. 50 lacs. He stated that "Transactions in immovable properties are usually under-valued and under-reported. One-half of the transactions do not carry the PAN of the parties concerned. With a view to improve the reporting of such transactions and the taxation of capital gains, I propose to apply TDS at the rate of one percent on the value of the transfer of immovable property where the consideration exceeds 50 lakhs. However, agricultural land will be exempt."

Income Tax provisions

The provisions relating to TDS on sale of Immovable Property are contained in Section 194(1A) of the Income Tax Act. As per the provisions, w.e.f. 01.06.2013 TDS on sale of Immovable Property should be deducted at source from payment on transfer of immovable properties (other than agricultural land) where the consideration paid or payable is more than Rs 50,00,000/- irrespective of the mode of payment (i.e. by cash, cheque, draft etc.).

TDS Rate

TDS is deductible at the rate of 1% of the consideration payable to a resident transferor. If a valid PAN is not provided by the seller to the buyer, the TDS rate would go up to 20% as per the provisions of section 206 AA.

TAN Requirement

The provisions of Section 203A relating mandatory requirement of TAN for deduction of TDS shall not be attracted. i.e. Purchaser of immovable property is not required to obtain TAN for deduction of TDS.

Payment and return of TDS

Tax is required to be deducted at the time of payment or at the time of giving credit to the seller(s) of immovable property, whichever is earlier. In case of advance payment, TDS is required to be deducted at the time of making advance payment itself. Similarly, in case payment is made by installments, the TDS is required to be deducted at time of paying each such installment.

In case of joint owners, the threshold limit of Rs 50,00,000/- is to be determined property-wise and not transferee-wise. The number of buyer or seller would not matter at all i.e. if there are more than one buyer or seller and the individual sale or purchase price is less than Rs. 50 lacs but the aggregate value is more 50 lacs, the provisions of Section 194(1A) shall be applicable and TDS would be required to be deducted by buyer(s) at the time of making payment to seller(s) by filling separate form 26QB for each such payment.

The TDS deducted u/s 194-IA is required to be paid electronically (online) on Challan-cum-Statement Form No.26QB to the credit of Central Government within a period of seven days from the end of the month of deduction. The payment of TDS u/s 194-1A can be made on website of NSDL https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp.

Further, the purchase is required to furnish certificate of deduction of tax at source in Form No.16B to the seller within fifteen days from the due date for furnishing the challan-cum-statement in Form No.26QB.

Procedure to download Form 16B

  1. Login to: https://www.tdscpc.gov.in/en/deductor-home.html
  2. Click on Register as New User and you will be asked to provide basic details such as your
    PAN
    Date of Birth
    Last Name, Middle Name and First Name
    and would also be required to further validate details of either tax deducted (option 1) or tax paid by you (option 2). Fill details under Option 2.
  3. On Validation of details, your account will be created. User ID by default would be your PAN. You would have the option of providing password of your choice.
  4. An email would be automatically generated sent to your email address providing you an activation link with a second message will be sent on your mobile.
  5. After activating your account, you can view 26AS statement and download Form 16B in case you are the purchaser of immovable Properties.
  6. To download form 16B, go to download. Click on request for form 16B. Validate details and submit your request. After some time the same shall be available under download menu. Click on download, click of available and download and save it your computer.

Please note that Form 16B is available for download after 2-3 working days from the date of deposing TDS.

Provisions for Non Resident Indians

If payment is made to a Non-Resident then provisions of section 194-IA will not be applicable. Rather section 195 will be attracted and TDS is required to be deducted @ 20% + Education Cess (2% of TDS) + Secondary & Higher Education Cess (1% of TDS) on the sale consideration. Surcharge @ 10% will be applicable if amount paid exceeds Rs 1 crore. The limit of Rs 50,00,000/- is not applicable in case of payments made to NRI(s).

Non Compliance

In case of failure to comply with the provisions, interest and penalty would be imposed on the purchaser of immovable property. Interest will be charged @ 1% p.m or part of the month for failure to deduct tax or short deduction of tax from the date the tax was deductible till the date the same is deducted. Interest will be charged @ 1.5% p.m or part of the month for tax deducted but not paid to the government from the date of deduction till the date of actual payment.

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