The Income Tax Department issued a reminder on its website, urging property buyers to file Form 26QB within three days if they have purchased any immovable property exceeding Rs 50 lakh within one month. Form 26QB is essential for those property buyers who are liable to file a TDS return under Section 194-IA of the Income Tax Act. According to Section 194-IA, any buyer making sales consideration for the purchase of immovable property must deduct tax at source. This provision is applicable when an immovable property, other than rural agricultural land, is transferred for consideration or the stamp duty value of the immovable property of Rs. 50 lakhs or more.
Then to file the TDS return on this deduction, the deductor has to fill out a challan cum statement in Form 26QB within 30 days from the last day of the month in which the tax has been deducted. Failure to file the TDS statement within this period attracts payment of fee under section 234E at the rate of Rs. 200 per day during which such default continues and also an additional penalty. However, such a fee shall not exceed the amount of TDS.
Under Section 194 IA of the I-T Act 1961, homebuyers should deduct TDS at a rate of 1 per cent of the sale consideration for properties valued at Rs 50 lakh or more. For example, if a property is valued at Rs 60 lakh, the homebuyer needs to deduct Rs 60,000 (1 per cent of Rs 60 lakh) and pay the remaining amount to the seller. The deducted TDS must be deposited with the I-T department within 30 days. Sellers can later adjust this amount against their overall income tax liability when filing their returns.
Homebuyers must exercise caution to make sure the sellers' PAN is absent or deemed inoperative. Notably, if sellers failed to link PAN with Aadhaar by June 30, 2023, would have made the PAN inoperative from July 1, 2023. TDS should be deducted at a higher rate of 20 per cent in such scenarios.
So homebuyers if unaware, or if neglect to verify the validity of the PAN and its linkage with Aadhaar, only deduct 1 per cent TDS, then they will get shortfall notices from the income tax (IT) department. So homebuyers should verify the PAN's linkage with Aadhaar. Neglecting to do so can result in the remittance of the shortfall by the buyer, along with penal interest.
Verification of PAN details can be done using the official link https://eportal.incometax.gov.in/iec/foservices/#/pre-login/verifyYourPAN/1, where details such as the seller's PAN, name, date of birth, and mobile number should be entered. An OTP will be sent for verification to the seller's number, ask the seller to share it and on entering the OTP on the website, you can see the PAN's status.
Says Chartered Accountant Mayur J Sondagar, "If the PAN of the seller is inoperative due to non linking with Aadhaar then CPC will send short deduction notice to such buyers. Buyers then have following two options. If you want to pay that short deduction amount then Go to "Demand Payment for TDS on Property" option under e-Pay Tax tab on efiling portal and enter required details and make payment through it. An alternative is to raise grievances because at the time of filing 26QB there is no option to enter TDS amount manually (currently it was available) so how to pay tax at 20 per cent when the system to do it was unavailable," .
Additionally, make sure that the seller is a resident if you are deducting only 1 per cent. A Non-Resident Indian is required to pay 20 per cent tax at source in case the property is held for more than 2 years. If it is held for less than 2 years, then tax should be deducted as per his/her income tax slab rates. For NRI, the property value doesn’t matter, even if it is sold for less than Rs 50 lakh TDS has to be deducted as per the above rates.