TDS on Property: 5 important things you should know

With the introduction of Section 194-IA in The Finance Bill 2013, here comes the new provision of Tax Deduction at Source on Property transfers.

TDS on Property

According to The Finance Bill 2013, all sale transactions related to transfer of any immovable property, with the consideration amount exceeding Rs 50 lakh demands a tax deduction of about 1 per cent of the transaction amount by the transferee (buyer) at the time of credit or at the time of payment through all mediums.

The tax deducted shall be deposited into the Government Account through any of the authorised bank branches using e-Tax payment option through NSDL.

1. Important things from Section 194IA of Income Tax Act:

• This provision is applicable to all those transactions effected on or after June 1, 2013.

• Tax deduction at source on transfer of any immovable property exempts rural agricultural lands.

• A person deducting TDS on Property is not mandatorily required to possess a TAN No.

2. When does TDS on Property come in to the scene?

Transactions of immovable property are usually undervalued and under reported. Thus, in order to improve the reporting mechanism of such transactions, P. Chidambaram had introduced section 194IA demanding a TDS on property at a rate of 1 per cent when the property transfer value exceeds Rs 50 lakh applicable w.e.f. 1st June 2013.

3. Who is liable for TDS during property transactions?

The buyer of the property is responsible for the Tax deduction of about 1 per cent on the transaction amount. Example, if A buys a property worth Rs 50 lakh from B, then A is liable for a TDS deduction of 1 per cent (Rs 50,000) and responsible to deposit the same.

4. Required documentation

Apart from the transaction details, in addition to the basic information of the buyer and seller, the buyer is required to furnish the copies of PAN of both buyer and seller at the time of filling the Form 26QB.

A bank challan along with the Form 26QB is required for depositing TDS through offline method at authorised bank branches.

5. Procedure to be followed

As per the Notification No 39, dated 31st May 2013, the TDS amount deducted by the buyer at the time of making payment to the seller has to be deposited within a period of 1 week (7 days) from the end of the month in which the deduction has been made.

First, the buyer is required to duly fill the form 26QB furnishing all the required details regarding the property purchased, TDS on property calculation under Section 194IA, details of the buyer and seller etc.

Following the form 26QB, the buyer is asked for the preference of depositing TDS on property.

Online

Once, the buyer opts for the online payment procedure, the Form 26QB is automatically redirected to the buyer’s e-payment gateway followed by procedures respective to buyer’s choice.

Offline

Alternatively, the buyer can opt for an offline mode of payment by taking a print of the duly filled form and submitting the same along with the TDS amount at the authorised bank branches.

After successful submission of the Form 26QB along with the TDS amount, the buyer is required to issue the Form 16B (Certification of TDS under 194IA procured from Centralized Processing Cell of TDS (CPC-TDS) to the seller of the property with respect to the TDS deducted.