TDS on Property

The real estate sector is the most significant contributor to India's GDP (GDP). According to data, it is expected to reach a market size of around US$ 1 trillion by 2030, equating to 18-20% of GDP. All this is happening because of the increased transaction in this sector. However, the purchase and sale of real estate assets have tax implications. If the transaction value is higher, the property buyer must deduct TDS (Tax Deducted at Source). The following article will go over everything about TDS on property.

What is TDS on the Property?

The government enacted a new rule requiring buyers of immovable property to pay TDS on transactions valued over ₹50 lakhs from June 1, 2013. The details of TDS on property purchase are outlined in Section 194-IA of the Income Tax Act. Here are some details of this section affect of TDS.

• If you are a property buyer, you must deduct 1% TDS from the total sales consideration.
• No TDS is required if the sales consideration is less than ₹50 lakhs.
• In the event you are paying for the property purchase in instalments, you must deduct TDS on every instalment paid.
• The consideration value includes charges such as utility fees, maintenance fees, club membership fees, or incidental charges required for the transfer of property ownership. This pointer applies to immovable property bought on or after 1st September 2019.
• TDS is levied on the total sale consideration value. This means that if the sales consideration is ₹60 lakhs, TDS is levied on the entire amount rather than just ₹10 lakhs.
• As a buyer, the seller is not required to provide the TAN before you make payment. However, if the seller fails to provide PAN, you must deduct TDS at a rate of 20%.
• You must deposit the TDS within 30 days of the month in which it was deducted using Form 26QB.

How to Pay TDS on a Property Purchase using Form 26QB?

Online process:

1. Visit tin.nsdl.com and navigate to the 'Services' section. From there, select ‘e-payment-Pay taxes online. Following that, your screen will display various challans in a new window.
2. Navigate to the box that contains Form 26QB and select the 'Proceed' tab.
3. In case you are a corporate payer, choose code 0020. Non-corporate payers are required to select 0021. Next, your screen will display information like assessment year, financial year, and payment type.
4. Next, fill in the buyer's and seller's PANs, residential status, the transferor and transferee addresses, the address of the property in question, the consideration amount paid, the tax amount, and a few other details.
5. After submitting details, your page will display 'payment info'. On this page, you will see two payment options. One is online – 'e-tax payment immediately, and the other is offline – and 'e-tax payment on the subsequent date.' Choose any of them and tap on the 'Proceed' tab.
6. If you pay online with net banking, print the challan 280 after you make your payment.
7. In the event of offline payment, you must download the Form 26QB receipt, which includes a unique acknowledgement number. Then, within ten days of receipt generation, submit the receipt with a cheque to any authorised bank. After the transaction is completed, the bank will issue you a challan.

Consequences of Late/Non-Filing of TDS statement

The late or non-filing of the TDS statement has negative consequences for both the buyer and seller of the property. Here are the specifics.

For property sellers:

• If you are a seller, delaying or failing to submit Form 26B will prevent you from claiming credit for TDS on the sale of the property.

For property buyers:

• If you delay filing Form 26QB as a buyer, you will be charged Rs 200 per day until you submit the form under Section 234E.

To Conclude

TDS on the property is mandatory for real estate transactions worth above Rs 50 lakhs. According to section 194-IA, the TDS rate on the sale of the property is fixed at 1% of the actual sales consideration. If the buyer fails to deduct the tax or both the buyer and seller fail to submit Form 26QB, they will face several legal consequences. To know more, please read the relevant articles at our website www.pnbmetlife.com