TDS on Transactions of Immovable Property

Under Section 194A 1% TDS is applicable on transactions of an immovable property which costs more than Rs.50 lakh. If there are two or more buyers of a property or the total amount is paid to the seller in installments TDS will still be applicable.

The then Finance Minister P. Chidambaram in 2013 introduced Section 194A, under which TDS on transactions of immovable property will be at the rate of 1% for property costing more than Rs. 50 lakh. The idea was to bring the black marketeering and corruption in the real estate sector under control. Many people are still not aware of or clear about this tax component.

Let us dispel the myths first.

  1. The taxation is on the total sale value of a property that costs more than Rs. 50 lakh, and not on the amount exceeding Rs. 50 lakh. So, if you bought a bungalow worth Rs. 70 lakh, the tax has to be paid at the rate of 1% of Rs. 70 lakh and not 1% of Rs. 20 lakh.
  2. If a total of Rs. 70 lakh is paid in instalments to the seller, TDS is still applicable. TDS has to be deducted from each instalment and paid to the Income Tax Department.
  3. If there are 2 or more buyers and Rs. 70 lakh is being divided between them as Rs. 35 lakh each, TDS is still applicable. The tax is deducted on the total cost of the property and not individual expenditure.

The onus of tax payment here rests with the buyer and not the seller. The buyer has to deduct 1% of the sale amount and pay tax under the head ‘Transaction of Immovable Property’. The TDS has to be given to the Income Tax Department through Form 26QB. This form can only be filled online. Once the tax is paid, the buyer has to provide Form 16B to the seller confirming the tax deduction and payment.

How To Pay TDS On Property Online?

Given below is the procedure to pay tax on immovable property transactions:

  • Go to the NSDL-TIN website and on the lower half of the website, you’ll find the option ‘TDS on Sale of Property’. Click on it to and go to the option ‘Online form for furnishing TDS on property (Form 26QB)’.
  • A new page will open, on which you have to choose the right challan. The one you need to click on is the first option – TDS on Sale of Property.
  • Fill up Form 24QB with complete details of the property, the amount deducted as TDS, contact and personal details of buyer and seller, PAN of the involved parties, etc. Ensure that you make no error in this form, as an online correction is not possible. You will have to directly get in touch with the Income Tax Department to make any modification to the form.
  • Do not enter “” in any section. If there are more than 1 buyer or seller, Form 26QB has to be filled separately for each pair of buyer and seller. So, if there are 2 sellers and 1 buyer, 2 forms need to generated; if there are 2 sellers and 2 buyers, 4 forms need to be filled, and so on.
  • Once you submit the form, you will get a confirmation click. Confirm the submission and the screen that follows will offer you 2 choices – ‘Print Form 26QB’ and ‘Submit to the Bank’. It will also show you the acknowledgment number, which needs to be saved. You can also find the acknowledgement number from the ‘View Acknowledgement Number’ option under the TDS on Sale of Property section on the NSDL-TIN website
  • Take a print of the form first – whether to save as PDF or physically print it on paper – and then move on to pay the TDS amount to the bank.
  • You can pay the TDS amount only through net banking through authorised banks, the list of which is available on the NSDL-TIN website. So ensure that the amount you have deducted as TDS on the property is in an account with an authorised bank enabled with net banking. Make the payment and save the counterfoil/receipt.

Two to five days after you pay the TDS, you can download Form 16B from TRACES (TDS-CPC website).

  • Sign in to the TRACES portal with your PAN.
  • Form 16B For Buyer’ can be found in the ‘Downloads’ menu.
  • Fill in the information regarding the property transaction, assessment year, acknowledgment number and PAN of Seller.
  • Click on ‘Proceed’ and ‘Submit Request’ once the confirmation screen appears.
  • Once the request is accepted, and if the Form 16B is ready, a note confirming a download request number will appear.
  • Use the request number to search for the downloaded form in ‘Requested Downloads’. When the correct file appears, click on the ‘http download’ and save the file to your computer.

You can also make the online payment later – a day or two or more after generating Form 26QB. For this, you need to choose ‘E-tax payment on subsequent date’ under the TDS on Sale of Property option on the NSDL-TIN website.

How To Pay TDS On Property At Banks?

If you do not have access to net banking facilities or wants to deposit the TDS as cheque/demand draft, then you can choose to pay TDS the good old way – go to the bank. The following steps are required to pay TDS through banks:

  • At the end of filling the Form 26QB online, indicate your choice of mode of payment as payment through bank branches.
  • Take a print out of the filled-up Form 26QB and the acknowledgement slip.
  • Check the authorised banks and visit the nearest bank branch.
  • Provide your acknowledgement slip to the bank. If this bank is where you maintain your account, the bank can simply do an online transaction to the I-T Department. Otherwise, you can give a cheque or demand draft to the bank and the bank will make the online transaction.
  • Once this is done, you will get the challan counterfoil as confirmation of your tax payment.

Penalty Applicable To TDS On Property:

The tax amount has to be paid to the government within 7 days of transaction, whether in instalments or in full. The penalty of not paying TDS on immovable property can be up to Rs. 1 lakh under Section 271H.

To avoid penalty, you can pay the TDS, interest amount and late payment fee as soon as you receive a tax notice. Under Section 201, you’ll have to pay an interest of 1% a month if tax wasn’t deducted and 1.5% if tax was deducted but not paid to the government. The late filing fee applicable under Section 234E is Rs. 200 per day depending on the maximum tax due. If the seller has already paid capital gains tax, the late filing fee could be reduced or cut off altogether.

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