Tax Deducted at Source (TDS) on the sale of property is applicable as per the Income Tax Act, 1961. As per the Act, if an immovable property (i.e., a building or part of a building or any land other than agricultural land) is being sold costing more than Rs 50 lakhs, then TDS needs to be deducted by the buyer of the property at the time of making payment to the seller. The rate of TDS on the sale of property is 1% for properties that are sold for more than Rs. 50 lakhs.
Here are some key points to consider regarding TDS on the sale of property:
Applicability: TDS is applicable if the sale consideration of the property exceeds the specified threshold limit, which is currently set at Rs. 50 lakhs. If the sale consideration is equal to or less than this threshold, or if the property being sold is agricultural land, TDS is not required to be deducted.
If property is sale by NRI, TDS is required to be deducted under Section 195 even the sale consideration does not exceed the threshold limit of 50 lakhs.
TDS Rates: The TDS rate for the sale of property is generally 1% of the total sale consideration. However, if the seller is an NRI, then TDS on the sale of property is 20% on long-term capital gains and 30% on short-term capital gains.
Buyer's Responsibility: The buyer of the property is responsible for deducting TDS at the time of payment to the seller. The TDS amount should be deducted from the payment made to the seller and remitted to the government within 30 days from the end of the month in which TDS was deducted.
PAN of the Seller: It is mandatory for the seller to provide their PAN to the buyer. If the seller fails to provide a PAN, the buyer is required to deduct TDS at a higher rate, i.e., 20%.
TDS Certificate (Form 16B/16C): After deducting TDS, the buyer should issue a TDS certificate to the seller in Form 16B (for TDS on the sale of property other than agricultural land) or Form 16C (for TDS on the sale of property where the seller is a non-resident). This certificate serves as proof of the TDS deduction.
Filing TDS Returns: The buyer is required to file a TDS return on Form 26QB (for TDS on sale of property other than agricultural land) or Form 27Q (for TDS on sale of property where the seller is a non-resident) within 30 days from the end of the month in which TDS was deducted. Failure to file this form or pay TDS can result in penalties and legal action.
TAN is not mandatory: A buyer should have a TAN No. for deduction of TDS. TAN No. is not required in case the property is purchased from a Resident Indian but is mandatory in case the property is purchased from a Non-Resident Indian. In case the buyer does not have the TAN No., he should apply for the same before deduction of TDS. Also note that in case there are 2 buyers, both of them would be required to apply for a TAN No.
TDS Return
Form 26QB is used for the payment and reporting of TDS on the sale of property under Section 194-IA of the Income Tax Act, 1961.
Details to be provided: The buyer needs to provide various details in Form 26QB, including the buyer's and seller's PAN (Permanent Account Number), communication address, email address, mobile number, property details (such as property address, property type, and consideration value), and the TDS amount deducted.
Payment of TDS: The buyer is required to make the TDS payment online through the NSDL website. The payment can be made using net banking, a debit card, or a credit card. After successful payment, a challan containing a unique acknowledgement number (also known as the TDS certificate number) is generated.
TDS Certificate: Once the TDS payment and Form 26QB are filed, the buyer can download the TDS certificate (Form 16B) from the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal. The TDS certificate should be issued to the seller as proof of TDS deduction.
Form 16B
Form 16B is a certificate issued by the buyer of immovable property to the seller of the property as proof of the tax deducted and deposited.
Form 16B contains details such as the name, address, and PAN (Permanent Account Number) of both the buyer and the seller, details of the property, the amount of TDS deducted, and other relevant information. The buyer is responsible for obtaining Form 16B from the TRACES (TDS Reconciliation Analysis and Correction Enabling System) website and providing it to the seller within 15 days of the due date for filing the TDS return.
The seller can use Form 16B as evidence while filing their income tax return to claim credit for the TDS deducted on the property sale.