Section 194IA of the Income Tax Act 1961 states that tax should be deducted at source, during the sale of the property, by the buyer from the payment made to the seller. TDS is required to be deducted during the sale of every type of property except during the sale of agricultural land.
TDS will only be deducted if the sale value amounts to more than Rs. 50 lakhs. The rate of TDS is 1%, which is to be deducted and paid by the buyer. No additional surcharge or cess is required to be paid on this 1% TDS. TDS is required to be deposited by the buyer within 30 days from the end of the month in which it was deducted.
The TDS is to be deposited by the buyer along with Form 26QB stating the PAN of the buyer as well as the seller. TDS payment and the form can be filed online. After the successful deposition of the form and the payment, a challan will be generated including the CIN and payment details, which will be the proof of deposition and should be retained by the buyer. The payment will reflect on Form 26AS (Part F) of the seller (as the payment is made on behalf of the seller) within 7 days. The buyer is required to present the TDS challan to the seller under form 16B. The TDS certificate will be available for download on the TRACES website.
If the seller does not use the property sale for capital gains, the credit of the TDS can be claimed by the seller. TDS amount can be found in Form 16B and Form 26AS. But, if the seller wants to claim an exemption under capital gains, he can claim the TDS refund by providing the details while filing the tax returns or by procuring a certificate by the Assessing Officer stating that no TDS must be deducted from the payments. The seller can then present the certificate to the buyer.
New TDS Rule for Property Transactions in Budget 2022 Proposal
- With the aim toward eliminating unpredictability in the Income Tax Act, Finance Minister Nirmala Sitharaman has asked to enhance one per cent TDS on a non-agricultural secured property of above 50 lakh on the basis of stamp duty value or sale price whichever is higher.
Critical Points on Property Sale Under TDS
- It is the sole responsibility of the buyer only to deduct TDS even if the sale property is procured through a home loan or from a builder. In some cases, the bank may deduct and deposit TDS on behalf of the buyer. You should request the bank to do so
- TDS is required to be deposited by the buyer within 30 days from the end of the month in which it was deducted
- The TDS is to be deposited by the buyer along with Form 26QB stating the PAN of the buyer as well as the seller
- The penalty can be charged for non-filing or non-deposition of TDS by the buyer
- The buyer is required to deposit the TDS while making the payment to the seller. If the payment is made in installments, then TDS must be deducted from each installment. The buyer can also deduct the whole TDS while settling the last installment
- TDS should be deposited in Form 26QB and all details should be provided in the form
- TDS for property sale can be deposited online through- https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
- After deposition TDS on property sale, the buyer is required to present a tax certificate to the seller. The seller can download the Form 16B from http://contents.tdscpc.gov.in/
Penalty on Property Sale for Delay in Payments
The Penalty Under Section 201
- 1% interest every month for delay starting from the date on which the deduction was scheduled
- 1.5% interest for late payment of tax to the government from the date on which the payment was scheduled
The Penalty Under Section 234E
- Late Fees of Rs. 200 per day is to be paid for a delay in filing the statement of TDS. Late Fee penalty will be lower of the total TDS liability or the number of days delayed multiplied by Rs. 200.
- For example, if the total liability of TDS is Rs. 30,000 and there has been a delay of 200 days then the penalty of Rs. 30,000 will be paid by the buyer instead of Rs. 40,000 (Rs. 200 * 200 days).
General Queries on TDS Section 194IA
Q.1 – Is 1% TDS as per Section 194IA applicable on purchase from an NRI?
No, for deduction of TDS under this section, the seller should be a resident of the country.
Q.2 – If any buyer purchases two properties from the same seller within 2 months and the value of both the properties is 40 lakhs, is the seller required to pay TDS under the section?
No, the seller is not required to pay TDS for any property as the value of transactions is less than 50 lakhs.
Q.3 – What is the meaning of consideration under section 194IA of the Income Tax Act, 1961?
Consideration is the value for which the deal is being completed between the parties, stamp duty value of such property, whichever is higher.
Q.4 – Does the 1% TDS provision under section 194IA applicable to basic cost or overall cost of the property?
Under section 194IA, the seller has to deduct the TDS if the consideration is greater than 50 lakhs and the buyer does not have to worry about the addition of GST in the value of the property as it will increase the tax on the transaction
Q.5 – Does section 194IA Cover JDA contracts?
Yes, JDA contract is not different from any other contract so section 194IA will apply.
Q.6 – Is it possible to claim the refund of TDS if the deal gets cancelled? If yes then is it offline or online?
Yes, if a deal gets cancelled, the seller can claim a refund of the TDS deducted online
Q.7 – Is it possible for the salaried assessee to claim TDS under section 194IA while filing the returns?
Yes, a salaried person can also get the TDS under section 194IA for the property.
Q.8 – Can a group of four individuals purchasing the property in one registry can get the benefits of section 194IA if the consideration is that of 70 lakhs?
Yes, they can claim as the value of consideration is more than 50 lakhs.
