TDS on sale of property section 194IA

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As per section 194IA, TDS  on sale of property was introduced in the year 2013-14 budget with view of eliminating evasion of tax. The main purpose of introduction of this section is to improve under valued and under reporting property sales across the country.So as to increase the tax revenue  through capital gains by the government.

The section 194IA was came into force from the 1st June 2013. The section of TDS on immovable property sale aims to deduct 1% TDS Where consideration of the deal equal or more than 50 lakhs.

Exemption of section 194IA

The sales of Agricultural land is exempted from section 194IA as announced by the FM.

TDS on sale of property is to be deducted on

TDS Must be deducted on all kinds of immovable property transactions like sale of vacant land,commercial and non commercial buildings, flats.TDS shall be deducted on the amount excluding VAT & Service tax. TDS shall be deducted irrespective of the taxable income of the seller.

How to calculate TDS on sale of property

If you are selling a property on 60 lakhs +VAT & Service tax. You have to deduct tds 1% from 60 lakhs = 60000. The tax part like service tax and VAT shall not be considered while calculation tds deduction.

Other important points to be noted on section 194IA 

  • Lower deduction of TDS cannot be allowed to the buyer in the case of sale of proprty.
  • TDS Shall be deducted at the time of payment to the seller in case there is a home loan involved in the transaction. No tds deduction is allowed at the time of EMI payment.
  • Tax deducted shall be deposited on or before the TDS Payment due date.
  • The seller must have a TAN Number at the time of TDS Deduction and quoted at the time of TDS deposit and filing return.
  • As per Sub section 3 of Income tax act states that a person deducting TDS on property is not mandatory required to possess TAN NO.

Form 26QB for TDS on property payment

Before making payment of TDS,You have to submit Form 26QB for making payments of TDS on property. Form 26QB cannot be submitted manually. You have to submit it through online form.The link to 26QB is given below.

However you have the option to make payment through offline banking . You are allowed to take the printout of Form 26 QB for making offline bank payment immediately after submitting Form 26QB. Else you can choose the option to make online payment.

Issue of Form 16 B to the seller of property

The buyer of the property is responsible for issuing Form 16B to the seller of property after  15 days from the end of the tds payment month. Form example: TDS made on September 7th 2016 would required to issue Form16 B on or before October 15th.

What is more than one buyer and seller

  • TDS is required to be deducted if there are more than one buyer to a single property and the buy value of each buyer is less than 50 lakhs but the aggregate of all buyers crosses 50 lakhs.
  • TDS is required to be deducted if there are more than one seller to a same property and the individual sale value to each seller is less than 50 lakhs but the aggragate total exceeds 50 lakhs.

Consequences of non deduction of TDS on property.

  1. As you know delay in tax payments costs us more. In case a buyer is not deducted tds on sale of property. He/She is liable to pay 1% interest per month on the tax amount not deducted.
  2. If a buyer is deducted TDS but not deposited, he shall be liable for interest 1.5% per month on the tax amount not deposited.Also the assessing officer can levy a penalty up Rs one lakh ( Rs 100000.00)For the late deposit.
  3. The late filing of TDS return 26 QB attract a penalty of 200/day from date of last date of tds return filing due date.

Comments (2)

  • i AM A RESIDENT INDIAN WILLING TO BUY PROPERTY WORTH Rs 26 lACS FROM NRI. What should be the TDS for this deal. Kindly reply

    Sanjay Gaur

  • I bought a under construction flat whose value without GST is below Rs 50 Lacs, but it exceeds Rs 50 Lacs with GST. Should I deduct 1% TDS ?

    There is a CBDT circular ​which clarifies that TDS is to be deducted on amount excluding GST, if GST is indicated separately. While this circular clarifies the ‘quantum’ on which 1% TDS should be applied, but it is not clear whether or not GST should be excluded from consideration value for the purpose of scoping TDS applicability limit of Rs 50 Lacs.

    Please share your valuable opinion with any case law or guidance issued on this matter


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