Section 194IA of the Income Tax Act, 1961

Every taxpayer is surely familiar with or has come across the term ‘tax deduction at source’. 

 

TDS applies differently to investments and property-related matters. As such, many aren't aware of the provisions of TDS applicable when they sell a property. 

 

TDS, or the Tax Deduction at Source, is an indirect tax that is charged on an individual’s income. It is applicable to both regular income as well as one-time income. 

 

So, under Section 194IA of the Income Tax Act of 1961, TDS is also applicable when you buy any sort of property, like:

• A House

• A building or a part of it

• A part of the land (residential or commercial)

 

Read on to know more about Section 194IA and get more insights on TDS on the sale of the property.

As its name suggests, TDS is a tax that is payable by the buyer when they make any payment to the seller. Unlike Income Tax, it is an indirect tax that is deducted at the source of the payment. 

 

In the case of TDS on property sale, the government introduced it to check corrupt practices in transactions related to immovable properties.

Section 194IA of the Income Tax Act of 1961 mandates that the buyer has to deduct 1% of the transaction as TDS. However, this provision of TDS on the sale of immovable property is applicable only when the value of the property exceeds ₹50 Lakhs.

 

The following are the requirements that need to be fulfilled under Section 194IA of the Income Tax Act:

1. The rate of TDS on the sale of the property is 1% of the total sale amount of the property.

2. The TDS has to be deducted from the buyer and not the seller.

3. There is no need to deduct TDS on property sale if the value of the property is below ₹50 Lakhs. 

4. The TDS on the sale of the property is also not applicable on agricultural lands.

5. If the sale is carried out in several instalments, the TDS for the property sale will be deducted from each instalment.

6. When a sale of the property is being carried out, all charges should be included in consideration for the value of the property. The TDS has to be paid on the entire sale amount. They may include:

• Nature club membership fee

• Car parking fee

• Water or electricity facility fee

• Maintenance fee

• Advance fee 

1. The TDS on the sale of the property is applicable even when there is more than one buyer or seller involved. 

2. The buyer can make the payment for TDS on property sale using PAN and does not require a TAN (Tax Deduction Account Number).

3. The buyer has to obtain the PAN of the seller for the payment of TDS on immovable property. If you do not have the seller’s PAN, a TDS of 20% of the total sale value will have to be paid.

4. The TDS is either deducted at the time of payment, including payments done in instalments, or at the time of giving credit to the seller, whichever is earlier.

5. The TDS on the immovable property has to be paid by using Form 26QB. Parties have 30 days from the end of the month in which the transaction was carried out.

6. The buyer must provide the TDS certificate in Form 16B to the seller after completing the process. It is available around 10-15 days after depositing the TDS.

To file a TDS on the sale of a property, you just need to follow these simple steps:

• Step 1: Visit the Tax Information Network website of the Income Tax Department

• Step 2: Select the online services option

• Step 3: Now, go to the e-payment section

• Step 4: Choose Form 26QB under the sale of the property section

• Step 5: Click on the ‘TDS on Property Sale’ as challan

• Step 6: Enter details like PAN and contact details of buyer and seller, property information, amount of tax deposited

• Step 7: To complete the process, click on the submit button

• Step 8: You can print a copy of the challan for future reference

After successfully filing the TDS on the sale of the property, the buyer must get the TDS certificate in Form 16B. Here is how you can obtain it in a few easy steps:

• Step 1: Log in to the TRACES website 

• Step 2: Click on the ‘Form-16B (for the buyer)’ option in the download tab

• Step 3: Enter the PAN details of the seller and acknowledgment number details pertaining to the property transaction 

• Step 4: Click on the ‘Proceed’ button

• Step 5: Cross-check all the details once before clicking on the ‘Submit a request’ button

• Step 6: After your request is processed, click on the ‘Downloads’ tab 

• Step 7: Select ‘Requested Downloads’ from the available drop-down menu

• Step 8: The status of your Form 16B download request will be shown as ‘Available’

• Step 9: Download the ‘.zip file’ and open it with the date of birth of the deductor as a password

 

In conclusion, Tax Deduction at Source (TDS) is an indirect tax that you have to pay on regular as well as one-time income. As rent or money received on selling a property is also considered a part of your income, you need to pay TDS on the sale of a property as well.

 

However, TDS on property sale is only applicable on properties other than agricultural land exceeding ₹50 Lakhs in value. The rate of TDS on the sale of the property is 1% of the transaction. 

 

Also, note that the TDS on the sale of property in case of joint sellers or buyers remains the same. Within 30 days of completing the sale transaction, you need to file the TDS using Form 26QB, available on the Income Tax Department website.