Now that you are planning to buy a house, it’s essential to know exactly how much tax you have to pay. However, understanding TDS on sale of property is crucial. An interesting fact to note is that during a property sale, as a buyer, you are obligated to deduct a certain percentage of Tax at Source while paying the seller. However, TDS on the Sale of Property is only applicable when the property’s value is 50 lakhs or more.
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As mandated by the Section 194 IA of the Income Tax Act, 1961, the latest TDS rate on the sale of the property is 1% or 0.75% effective from June 1, 2013. The percentage depends on your date of payment. The deducted tax is to be paid by the seller to the Government through authorized bank branches.
TDS on Sale of Property in 2024
As of 2024, the TDS rate for property sales in India remains at 1% for individuals and Hindu Undivided Families (HUFs) and 2% for companies and other entities.
Whenever you are buying a property (a building or a single flat in a residential apartment) with a value of more than 50 lakhs, you are obligated by law to deduct a specific percentage of tax while paying the seller. This is known as TDS on the Sale of Property.
- Section 206AB: Doubles TDS rate if taxpayer has TDS of over 50,000 in the last two years without filing income tax return.
- Section 206CCA: Imposes a TDS rate of 5% or double the current rate, whichever is higher.
- Section 194Q: Applies to individuals with annual turnover exceeding 10 crores, requiring a 0.1% TDS for transactions above 50 lakhs.
- New Section 194S: TDS of 1% is applicable for the transfer of virtual digital assets at the time of payment.
- Sale of immovable property under Section 194-IA: Proposed amendment to TDS calculation, with tax at 1% to be deducted on the higher of the sum paid/credited or the stamp duty value.
- New Section 194R: TDS rate of 10% for individuals providing perks or benefits to residents involved in business or profession, whether convertible into money or not.
Immovable property, as defined, includes buildings, parts of buildings, and non-agricultural barren land. Under Section 194-IA of the Income Tax Act, here are the key details regarding TDS on land sale:
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- TDS Rate: The buyer deducts 1% of the total sale value as TDS.
- Property Valuation: If the property’s value is below 50 lakhs, no TDS deduction is required. Payment in instalments also necessitates TDS deduction with each payment.
- Inclusive Charges: The sale amount encompasses additional charges like club membership, parking fees, utilities, maintenance, or advance fees related to immovable property transfer. This rule applies to purchases made since September 2019.
TDS on Property Purchase Above 50 Lakhs Section
The section of the Income Tax Act that deals with TDS on property purchases above 50 lakhs is Section 194IA.
Here’s a summary of what this section entails:
- Applicability: This applies when you (the buyer) are purchasing immovable property (land, house, etc.) for Rs. 50 lakh or more from a resident Indian (seller).
- TDS Rate: You, the buyer, are required to deduct TDS at 1% of the total sale consideration.
- Calculation: TDS is deducted on the entire sale amount exceeding Rs. 50 lakh, not just the amount above the threshold. If the property costs Rs. 60 lakh, TDS is calculated on Rs. 60 lakh, not Rs. 10 lakh.
- Instalment Payments: If the payment is made in installments, TDS needs to be deducted from each installment amount paid.
Can Seller Pay TDS on Property on Behalf of Buyer
No, the seller cannot pay the TDS on the property on behalf of the buyer. In India, under Section 194IA of the Income Tax Act, the responsibility to deduct TDS on property purchases falls entirely on the buyer. Here’s why:
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- Legislative Requirement: The law specifies the buyer’s responsibility to deduct TDS at source (TDS) on property exceeding Rs. 50 lakh.
- Tax Compliance: The buyer acts as a tax collection agent for the government by deducting TDS from the seller’s payment.
- Record Keeping: The buyer needs to deposit the deducted TDS with the government and furnish the seller with a TDS certificate (Form 16B) as proof.
While the seller cannot directly pay the TDS, they can certainly:
- Inform the buyer: Remind the buyer about their obligation to deduct TDS to avoid any last-minute complications.
- Provide Documents: Assist the buyer with the necessary documents like their PAN (Permanent Account Number) for smooth TDS processing.
TDS on Property Purchase that is Immovable
Now, what is defined as an immovable property? It can be a building, a part of the building or any barren land other than agricultural land. Here are the required details as mentioned under Section 194-IA of the Income Tax Act regarding TDS on the sale of land:
Read: Delhi Apartment Ownership Act 1986: Key Provisions and Implications Explained
The buyer will deduct TDS with a TDS percentage of 1% of the total sale value.
If the property valuation is less than 50 lakhs, then there is no deduction in TDS payment on the sale of the property. The buyer can pay in instalments too. In that case, TDS should be deducted with every instalment. To comply with TDS regulations on the sale of immovable property, the buyer must deduct 1% of the sale consideration exceeding Rs. 50 lakh.
The sale amount agreed upon shall also include charges such as club membership fees, car parking fees, electricity and water charges, maintenance fees or any amount of advance fee that comes with the transfer of immovable property. This rule is applicable for properties purchased on or after September 2019.
TDS will be based on the amount mentioned in the Sale Deed and not on Capital Gains (the profit). For example, if the purchase value of a house you buy is 75 lakhs and the original sale price is Rs 69 lakhs, then the seller pays TDS of 75 lakhs and not six lakhs. This will also be applicable for properties with joint sellers or joint buyers. Post 2019 budget convention, the agreed-upon sale amount/ sale consideration amount will be Rs 75+1.5lakhs (Parking Fee) + 2 lakhs (Electricity and water fee) +1 lakh (membership fee) = Rs 79.5 lakhs.
Read: For Sale By Owner(FSBO): Pros and Cons, Legalities and More
Key Points to Remember When It Comes to TDS on Property Transactions
- TAN (Tax Deduction Account Number) for buyers is not necessary for TDS. You can pay using your PAN card.
- The buyer should have the PAN of the seller. Otherwise, TDS is deducted at 20% (the average rate for TDS on Salary).
- TDS is deducted during monthly installments or every time the seller is credited, whichever is earlier.
- TDS has to be paid within 30 days of tax deduction.
- Form 16B needs to be issued to the seller along with the TDS certificate. The buyer can generate and download Form 16B from their TRACES website.
Issuance of TDS Certificates in Form 16B downloaded from TRACES
When it comes to TDS (Tax Deducted at Source) on property purchase, it is important to understand the process of issuance of TDS certificates. The TDS certificate in Form 16B, which acts as proof of TDS deduction, can be easily downloaded from the TRACES (TDS Reconciliation Analysis and Correction Enabling System) website.
Thiscertificate is necessary for the buyer of the property to claim a tax credit for the TDS that has been deducted from the sale of the property. The issuance of TDS certificates in Form 16B from TRACES ensures a transparent and efficient process for TDS deduction and reporting on property purchase transactions.
It is also important to note that the TDS on property purchase must be paid using the 26QB challan and can be easily filed through the 26QB TDS return online. To ensure compliance with TDS regulations and to avoid any penalties, it is essential to keep track of TDS on property purchases and to have a clear understanding of the 26QB online payment process, 194IA TDS, and the full form of TDS.
TDS on Sale of Property in Case of Joint Owners
TDS on the sale of property in India in the case of joint sellers is a tax provision that applies only when multiple individuals jointly sell a property. When multiple owners jointly sell a property, the TDS liability is calculated based on their respective ownership shares in the property. Each co-owner’s share of the sale proceeds is considered separately for TDS purposes.
The buyer is responsible for deducting TDS on the total sale consideration at the applicable TDS rate (usually 1%) for the seller’s share. If the property’s sale value exceeds 50 lakhs, TDS is required.
For example, if two individuals jointly own a property and sell it for 1 crore with equal ownership shares, the buyer must deduct TDS on 50 lakhs for each seller, totaling 1% of 50 lakhs for each co-owner.
Co-sellers need to coordinate and ensure that the TDS is correctly deducted and deposited with the tax authorities. They can also claim credit for the TDS deducted while filing their income tax returns to avoid double taxation.
The TDS has to be paid in proportion to Capital Gains or the Considered sale value. Each seller is liable to pay TDS based on the values mentioned above.
TDS on Sale of Property in Case of Joint Sellers
The TDS has to be paid in proportion to Capital Gains or the Considered sale value. Each seller is liable to pay TDS based on the values mentioned above.
How to Pay TDS on Sale of Property Online
Follow these steps to pay TDS on the sale of land or property:
- Visit the official website
- Search for the TDS on Property (Form 26QB) and click on Proceed.
- A window appears where you have to fill in all the required details. Select “TDS on Sale of Property” as the applicable challan.
4. After filling in the details, you will receive a confirmation of your details. You can keep this form for future acknowledgement.
5. If you wish to pay online, click on Submit to the Bank and then pay through secure net banking channels.
How to Claim TDS on Sale of Property (Filing 26QB TDS Return Online)
As mandated by Section 194IA of the Income Tax Act, for the sale of property more than 50 lakhs, the buyer must deduct tax at source before making any payment to the seller. The buyer must obtain Form 16B and issue this to the seller. The property seller then takes the following steps:
- Furnish his PAN to the buyer so that he can fill the form online for submission to the Income Tax Department.
- Verify the deposit of Taxes deducted from the sale consideration. This will be reflected in the Form 26AS Annual Tax Statement.
- Generate Form 16B and deposit TDS on Sale of Property.
Punishment for deposit or non-deduction of property TDS
In the event that the TDS has still not been deducted from the purchase price of the property, the buyer will be obliged to pay interest at the rate of one per cent per month here on the amount that has not been deducted. If the tax withholding obligation has been satisfied but the tax itself will not be paid, an interest charge equal to 1.5% of the outstanding balance will be applied each month.
Also, a late deposit of tax deducted at the source on the property may result in a penalty the income tax officers may additionally assess penalty of up to one lakh rupees for the late deposit of tax deducted at the source on the property.
Finally, the penalty for failure to file Form 26QB in the event that the TDS Return is filed late, a fine in the amount of Rs. 200 each day would be charged. Nevertheless, the penalty shouldn’t be more than the amount of tax withholding that this form hasn’t been submitted.
| Type of Default | Calculation |
| Interest on Not Deducting TDS | 1% per month from the due date until actual deduction. |
| Interest on Not Depositing TDS | 1.5% per month from deduction date to payment date to the government. |
| Late Filing Fee (Section 234E) | Rs. 200 per day for delayed submission of Form 26QB. |
| Penalty (Section 271H) | At the Assessing Officer’s discretion, minimum penalty is Rs. 10,000, which can go up to Rs. 1 lakh. No penalty if TDS is paid with late fee & interest and the statement is submitted within 1 year of the due date. |
TDS paid in Instalment Amounts
TDS (Tax Deducted at Source) under Section 194IA is applicable at the time of payment, regardless of the transfer date. It should be deducted when paying the seller, including advance payments and installment payments made to the developer by the buyer, not the bank. In cases where the bank pays on behalf of the buyer, the buyer is responsible for TDS deduction, not the bank.
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Frequently Asked Questions
1. What is the significance of TDS on the sale of property for buyers?
The significance of number 1 TDS on the sale of the property is that buyers can avail of a tax deduction at the source. Here, the deduction is made by the buyer, NOT the seller.
2. What is the TDS rate on the sale of the property?
Ans. It is 1% for any purchased land or property with a value of more than 50 lakhs.
3. Does the NRI get the balance amount after TDS on the sale of a property??
For the sale of NRI property, the balance amount after TDS is to be paid directly to the NRI seller.
4. Does TDS apply to sale of land?
Ans. Yes, TDS applies to the sale of land, similar to other immovable properties, excluding agricultural land.
5. What is the TDS rate on sale of property?
Ans. The TDS rate for the sale of land (and other immovable property) is generally 1% of the total sale consideration if the sale value exceeds Rs. 50 lakh. The buyer is responsible for the payment of TDS on sale of property if the sale value exceeds Rs. 50 lakh.
6. How much TDS is deducted on sale of property?
The TDS (Tax Deducted at Source) rate on the sale of property is 1% for individuals and HUFs (Hindu Undivided Families), and 2% for companies and other entities. This TDS is deducted at the time of payment of the sale proceeds to the seller.
7. Is there a surcharge on TDS on the sale of the property?
Yes, there is a surcharge on TDS on the sale of property, which is applicable in case the seller’s taxable income exceeds Rs. 50 lakhs. The surcharge rate depends on the seller’s taxable income.
8. What is the full form of TDS?
TDS’s full form is Tax Deducted at Source. It is a system of tax collection in India, where tax is deducted at the source of income and deposited with the government on behalf of the recipient.
9. Is TDS applicable on brokerage on the sale of the property?
Yes, TDS is applicable on brokerage on the sale of the property. The brokerage amount is considered as income, and TDS is deducted at the applicable rate.
10. Who has to pay TDS on the sale of the property?
The buyer of the property is responsible for paying TDS on the sale of the property. The TDS is deducted from the sale proceeds at the time of payment to the seller.
11. Can the seller pay TDS on the property on behalf of the buyer?
No, the seller cannot pay TDS on the property on behalf of the buyer. The TDS is the responsibility of the buyer and must be paid by the buyer at the time of payment to the seller.
