How to file TDS on the Sale of Property

The term Property indicates a capital asset that includes flats, buildings, and surprisingly a plot of land. Further, the principle reason for the financial investors to invest into property is to create again by selling something very similar at a higher rate. Further, an immovable property draws in real estate returns, accordingly, exchanges including purchase and sale of Immovable Property is very normal nowadays. Nonetheless, it will be important to take note of that trading of property involves different Tax Implications. In this blog, we will talk about the concept and process to file TDS on Sale of Immovable Property.

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Concept of TDS on sale of Immovable Property

Section194IA inserted by Finance act 2013 and is pertinent from 01st of June , 2013. An individual who is buying any immovable property (other than agricultural land) from an inhabitant is needed to deduct TDS @ 1% from the sum payable on his behalf. TDS isn’t needed to be deducted if the property estimation is not as much as Rs. 50 lakhs.

Additionally, TDS is needed to be deducted on all sort of immovable property such private property, business property or industry with the exception of agricultural land.

Governing laws for TDS deduction of property

Section 194A of the Income Tax Act 1961 states the provisions concerning TDS at a sale of Immovable Property, or we can say TDS Deduction on Property. Nonetheless, for the situation where the seller is a NRI (Non-Resident of India), then, at that point, all things considered, rather than area 194 A, Section 195 of the Income Tax Act 1961 will win.

Rules regarding TDS deduction

The guidelines for TDS Deduction on Immovable Property are as per the following:

  • The property is referred to should be immovable property, like land, building, or a piece of land or building;
  • TDS doesn’t have any significant bearing on agriculture land;
  • For the situation where the seller is an NRI (Non-Resident of India), then, at that point, all things considered, rather than section 194 A, section 195 of the Income Tax Act 1961 will win;
  • For the situation where the provision of Section 194 LA, i.e., TDS on the Payment of Compensation on the Acquisition of Certain Immovable Property, is pertinent, then, at that point, all things considered, the provision of Section 194 LA won’t have any significant bearing;
  • The worth of the property being referred to should be essentially Rs 50 lakhs;
  • The provisions of TDS will apply to the thought paid by the purchaser for purchasing the property;
  • TDS will be pertinent at the pace of 1% of the consideration;
  • Just the purchaser has the option to deduct TDS on the purchaser of an immovable property. That implies the seller doesn’t have any power to deduct TDS;
  • TAN or Tax Deduction Account Number isn’t required for deducting TDS on Sale of Immovable Property;
  • The purchaser can utilize his/her PAN or Permanent Account Number for deducting TDS from the deal thought;
  • The purchaser needs to present the TDS deducted to the Government;
  • On the off chance that the instalment of the property buy is made in instalments, then, at that point, all things considered, the TDS demanded will be deducted on every portion paid;
  • Normally, the PAN of the seller is needed too for deducting TDS, nonetheless, in the event that the seller isn’t having PAN, then, at that point, all things considered, TDS charged will be at 20%;
  • The purchaser can deduct TDS either at the time of making the payment or at the hour of credit, whichever is prior;

Calculation of TDS on Sale of Immovable Property

TDS is needed to be deducted @ 1% on the sum payable to the seller of the property. In the event that the PAN number of the seller isn’t accessible then the TDS is needed to be deducted @ 20%.

No tax is needed to be deducted where the total sum of consideration (selling cost of property) is not as much as Rs. 50 lakhs. At the point when the measure of thought is Rs 50 lakhs or all the more then the TDS is to be deducted in a whole sum not just on the sum exceeding Rs. 50 lakhs.

Procedure for filing TDS on sale of Immovable Property

The process of TDS filing can be done under 2 Forms:

  • Form 26QB: The process of filing TDS under Form 26QB are as per the following:
    • Login to the authority gateway of NSDL[1];
    • Click on “Services”;
    • Choose “TDS on Sale of Property”;
    • Select the applicable challan Form 26 QB for the payment of TDS at a sale of property;
    • Fill in the details, like Tax Applicable, Financial Year, Status of the Seller/Payee/Transferor, different subtleties, and how much tax paid;
    • Click “Continue”;
    • Candidate should check the details recorded;
    • An acknowledgement number will be shown on the screen, along with two choices, i.e., “Print structure 26 QB” and “Submit to Bank”;
    • Choose “Print Form 26 QB” to take print out;
    • select “Submit to Bank” to make an online payment
    • If the purchaser doesn’t wish to pay the TDS via web banking, he/she might may print out the form and submit it to the respective bank
    • When the candidate has made the payment, a challan counterfoil is shown, including CIN no. also other payment details. The counterfoils is proof of payment
  • Form 16B: The process of filing TDS for immovable property under Form16B are as per the following:
    • Log in to the authority TRACES portal[1];
    • Register as a taxpayer;
    • Choose Form 16B for the purchaser;
    • Enter transaction details under Form16B is required;
    • Provide different details, like Assessment Year, PAN of the seller, Acknowledgment No, and so on;
    • Click on Proceed;
    • Check the details documented and affirm;
    • A download demand page will be displayed on the screen containing the Request number;
    • Choose  “Mentioned Downloads” to download the documents for which the request has been raised;
    • Search for Request number, which was produced at the time of raising the request, and click it;
    • Click “HTTP Download” to download the document;

Penalty for Non-Compliance while filing TDS on Immovable Property

Below listed are penalties if the provisions are not followed while filing TDS on Immovable property: 

  • Interest on Late Deposit of TDS on Property – In the event that the TDS has not been deducted, the purchaser would be needed to pay 1% interest each month on the amount not deducted. In the event that, the TDS has been deducted however has not been paid, Interest @ 1.5% each month would be relevant in such a case.
  • Punishment for Late Deposit of TDS on Property – The Income Tax Officer may likewise collect a punishment of up to Rs. 1 Lakhs for Late Deposit of TDS on Property.
  • Punishment for Late Filing of Form 26QB: In the event of late filing of TDS Return, a punishment of Rs. 200 every day would be collected. In any case, the Penalty should not exceed how much TDS for which this Form has not been filed.

Conclusion

According to the Finance Act 2013, TDS (Tax Deducted at Source) will be material on the exchange of immovable property, in which the consideration of the property exceeds or is equivalent to Rs 50 Lakhs. Further, for all transactions with impact from 01.06.2013, the purchaser of the property needs to deduct TDS @ 1% of the total consideration. A same will be done at the time of making instalment.

CategoryIncome Tax

CA Rishabh Maheshwari is an associate Chartered Accountant having expertise in conducting statutory and internal audits of large clients. He has also done a certified course on Concurrent audits of banks. He is responsible for coordination, planning, team leadership in connection with Audits and GST of Private and Public Companies with an experience of almost 3 years.

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