An Essential Guide to TDS Filing for Property Purchases
Taxes play an essential role when buying a property and it is vital to follow the regulations for a smooth, trouble-free transaction. One of the most important taxes to file is tax deduction at source (TDS) against a property transaction.
At the time of property purchase, the buyer is required to deduct TDS under section 194-IA when paying the seller. In this scenario, property refers to any immovable property like non-agricultural land or a building. Let's take a comprehensive look at what tax deductions are required at the time of buying a property and how to ensure you meet all compliance requirements.
When is TDS required to be deducted?
Under Section 194-IA of the Income Tax Act, when purchasing an immovable property, the buyer is required to deduct TDS from the seller under the following conditions
- The property is a non-agricultural land or a building or part of a building
- The sale value is more than ₹50 lakhs
Who is responsible for payment of TDS on a property purchase?
The buyer of the property is responsible for deduction of TDS from the payment to the seller and deposition of the same to the government
If the payment is made in instalments, TDS has to be deducted for each instalment paid.
What is the rate of TDS to be deducted?
The rate of TDS applicable is 1% of the sale value or the stamp duty value, whichever is higher. TDS is to be deducted on the entire sale value or stamp duty value. The sale value (or consideration value) here includes any additional charges paid for with the purchase, for instance, maintenance fees, parking fees, fees for electricity or water facility or other similar charges.
What are the requirements for TDS payment to the government
The buyer must file form 26QB and deposit the deducted tax with the government within 30 days from the end of the month during which TDS was deducted. The buyer can file the TDS and make the payment directly through the income tax portal after logging in with their PAN. The seller's PAN must be provided when filing, otherwise a deduction of 20% as TDS is applicable.
In case of multiple sellers and/or buyers, a TDS return is required to be filed by each buyer for each seller. For example, if A and B sell a property to X and Y, four TDS returns are to be filed
- By buyer X for seller A
- By buyer X for seller B
- By buyer X for seller A
- By buyer Y for seller B
After depositing the TDS to the government, the buyer receives the TDS certificate in the form of form 16B which they then should issue to the seller.
Steps for payment of TDS online
Paying and filing TDS can involve several steps, but with the assistance from Landeed's finance experts, the process becomes much simpler and more straightforward.
If you wish to file the TDS on the income tax portal directly, the steps are as follows:
Step 1: Log in to your account on the Income Tax e-filing portal using your PAN number and password. Click on e-File and select e-Pay Tax from the dropdown as shown below. Then select the New Payment on the top right.
Step 2: Select the Form 26QB tab from the list
Step 3: Enter the following details as per your property purchase:
- Buyer's details
- Seller's details
- Details of the property being purchased
Step 4: Select the payment method and proceed with payment of the TDS to the government
Step 5: Download the payment challan for your records. The document is essential to carry for registration in some states such as Karnataka
Step 6: After 7 days of the payment of TDS to the government, the buyer can login to the TRACES portal and download the form 16B to issue to the seller as proof of the TDS payment.
What happens if Form 26QB is not filed on time?
The income tax department receives annual data on processed property transactions by each the registrar and sub-registrar offices. The buyer is liable to pay penalties for delay in deduction of TDS or filing of form 26B. If form 26QB is not filed for a property purchase above 50 lakhs, the buyer is liable to get a tax notice from the IT department
If the form 26QB is not filed, the seller will not be able to claim the tax credit against it.
Conclusion
TDS payment and filing is an crucial step in the property buying process from the perspectives of both the buyer and the seller. Skipping the tax payment or filing incorrect returns can lead to legal problems in the future.
Download Landeed app today to get your TDS filing done seamlessly by experts.
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