TDS on Property Purchase

Any person who purchases a property from a resident transferor is required to deduct tax at source (TDS) on any money/consideration paid.

When is TDS on Property Purchase Required?

TDS must be deducted from all immovable property purchase. Immovable property means land or any building, other than agricultural land.

In the following cases, TDS on property purchase is not required under Section 194-IA:

• Immovable property transferred is rural agricultural land.
• Immovable property is being compulsorily acquired under any law.
• The total amount of consideration paid for the purchase of immovable property is less than Rs.50 lakhs.

TDS must be deducted during a property purchase at the time of transfer of money to the account of property seller or at the time of payment of any money in cash or by cheque or demand draft.

TDS Rate on Property Purchase

The TDS rate for property purchase is 1%. Surcharge, education cess or SHEC need not be added. In the the property seller does not have PAN or if PAN is not quoted, then TDS must be deducted at the rate of 20%.

Procedure for Remitting TDS Deducted on Property Purchase

Any amount deducted as TDS on property purchase must be remitted electronically within 7 days from the end of the month in which deduction was made to any of the banks authorised as below:

Payment of TDS on property purchase can be done only through online payment or at any of the banks above. The payment must be accompanied by a challan in Form 26QB.

Form 16B

All persons responsible for TDS on property purchase are required to furnish a TDS certificate to the seller in Form 16B within 15 days of due date of filing Form 26QB.

Other Important Points

TDS on which amount: If the amount of property is rs 70 Lakhs, then buyer doesn’t have to pay tax only on rs 20 Lakhs but on the entire amount of sale consideration, here it is on rs 70 Lakhs.

TAN to pay the TDS: Buyer of the property is exempt to procure Tax Deduction Account Number (TAN) for Tax deduction and payment of TDS under this section.

TDS on the entire amount or on the payment of each installment: Tax needs to be deducted at the time of payment either it is payment of entire amount or installment. If the payments are being made in installments then at the time every installment payment.

If some amounts have paid before 1st June 2013: If some amounts have paid to the seller before 1st June 2013 than TDS will be deducted on balance amount. Either balance amount is less than rs 50 Lakhs or more than rs 50 Lakhs this rule is applicable if the consideration of the property (Total amount) exceeds or is equal to rs 50 Lakhs. No TDS is required to be deducted in respect of installments paid before 1st June, 2013. The provision will also apply in case where the buyer has bought an under construction property prior to this rule coming into effect but the part payment is due after 1st June, 2013. TDS is required to be deducted on all such installments Individually which fall due after 1st June, 2013 but only on principal portion and not on the interest or penalty portion.

If more than One Buyer or Seller Challan and Form 26QB will be filled in by all the buyers for respective sellers for their respective share. For example in case of one buyer and two sellers, two challan and Form 26QB have to be filled in and in case two buyers and two sellers, four challan and Form 26QB have to be filled in for the respective property shares. For application of Section 194-IA total value of the property will consider, not the respective share of buyer and seller. E.g Property purchased by two buyer / seller and property value is rs 80 Lakhs, So sale consideration respective share of buyer / seller is rs 40 Lakhs each (below rs 50 Lakhs) but as per rule total value of the property will consider, so Section 194-IA is applicable.

Deposit of tax to the credit of the Central Government: Any sum deducted undersection 194-IA shall be paid to the credit of the Central Government within a period of seven days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QB. The sum so deducted shall be deposited to the credit of the Central Government by remitting it electronically to the Reserve Bank of India or the State Bank of India or to any authorized bank.

Certificate/statement for tax deducted at source: Every person responsible for deduction of tax undersection 194-IA shall furnish the certificate of deduction of tax at source in Form No. 16B to the payee within fifteen days from the due date for furnishing the Challan-cum-statement in Form No. 26QB under Rule 31A after generating and downloading the same from the web portal specified by the Director General of Income-tax (System) or the person authorized by him.

Furnishing of statements by tax deductor to department: Every person responsible for deduction of tax undersection 194-IA shall furnish to the Director General of Income-tax (System) or the person authorized by him a challan-cum-statement in Form No. 26QB electronically within seven days from the end of the month in which the deduction is made.

Interest on default of TDS payment

If TDS is not paid on time to the credit of the Central Government within a period of seven days from the end of the month in which the deduction is made. Interest under section 201 of Income Tax Act,1961 will be payable. This Act expressly states that any person liable to deduct TDS on the income distributed, makes default in deduction and / or payment of TDS shall be treated “assesse in default”. Such interest shall be paid before furnishing the Form 26QB.

If TDS has deducted but not paid: In this case one and one-half percent (1.5%) for every month or part of a month on the amount of such TDS from the date on which such TDS was deducted to the date on which such TDS is actually paid.

If TDS is not deducted: In this case one percent (1%) for every month or part of a month on the amount of such tax from the date on which such TDS was deductible to the date on which such TDS is deducted.

Late fee on default in furnishing statement of TDS (26QB)

No filing or late filing of statement of TDS / TDS returns (Form 26QB) shall invite late fees under section 234E. It should be filed with challan within a period of seven days from the end of the month in which the deduction is made. Deductor will be liable to pay by way of fee of Rs 200 per day till the failure to file TDS statement continues. The total fee cannot exceed the amount of TDS deductible for which statement was required to be filed. TDS return cannot be filed without payment of late filing fees. In other words, the late filing fees shall be deposited before filing the TDS return (Form 26QB). It should be noted that Rs. 200 per day is not penalty but it is a late filing fee.

Penalty on default in furnishing statement of TDS (26QB)

No filing or late filing of statement of TDS / TDS returns (Form 26QB) shall invite penalty under section 271H. It should be filed with challan within a period of seven days from the end of the month in which the deduction is made. As section 271H which provides that a deductor shall pay penalty of minimum Rs 10,000/- to Rs 1 lakh for not filing the TDS statement within one year from the specified date within which he was supposed to file the statement. Penalty under section 271H will be in addition to late filing fees prescribed under section 234E. Apart from delay in filing of TDS/TCS return, section 271H also covers cases of filing incorrect TDS/TCS return. Penalty under section 271H can also be levied if the deductor/collector files an incorrect TDS return. In other words, minimum penalty of Rs. 10,000 and maximum penalty of upto Rs. 1,00,000/- can be levied if the deductor/collector files an incorrect TDS/TCS return. TDS return will be filed without payment of Penalty under section 271H. It may be levied on deductor by the assessing officer.