The Income Tax Department has issued a reminder on its website to property buyers regarding the filing of Tax Deducted at Source (TDS) under Section 194-IA of the Income-tax Act, 1961.
Section 194-IA mandates that any buyer paying sales consideration of Rs 50 lakh and above towards the purchase of an immovable property must deduct tax at the source (TDS). This provision is applicable for any immovable property, excluding rural agricultural land. The consideration should be equal to or more than Rs. 50 lakh, and the seller should be an Indian resident for this provision to apply. The first step is that buyer should deduct tax from the seller in the form of TDS and then pay it to the government through Form 26 QB, and as proof, issue a TDS certificate to the seller.
To file Form 26QB, the buyer has to visit the TIN-NSDL website, select ‘e-payment: Pay tax online’, and then choose ‘TDS on Property (Form 26QB)’ option and click on ‘Proceed.’ Then the buyer should complete the Form 26QB with details of the property, Permanent Account Numbers (PANs) of both the buyer and seller, and choose the payment mode. After successful TDS payment, the buyer will receive a challan with a Challan Identification Number (CIN) and a Form 16B certificate.
The buyer should furnish TDS certificate to the seller in the Form No. 16B within 15 days from paying the TDS. TDS is paid after downloading Form 26 QB, and tax is paid along with it. To file the TDS return, the buyer 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. So, in 15 days from due date of furnishing Form 26QB, the TDS certificate is to be given to the seller. Failure to comply with this requirement can lead to penalties under Section 271H. The minimum penalty under Section 271H is Rs 10,000, which can go up to Rs 1 lakh.
The rate of TDS is 1 per cent for residents. For instance, if a property is valued at Rs 70 lakh, the buyer needs to deduct Rs 70,000 (1 per cent of Rs 70 lakh) from the total consideration and pay the remaining amount to the seller. The tax thus deducted in the form of TDS must be deposited with the Income Tax department within 30 days. Sellers can later adjust this amount against their overall income tax liability while filing their income tax returns (ITRs).
Buyers should be very careful regarding the seller’s PAN status. If a seller’s PAN is inoperative because of reasons, such as not being linked with Aadhaar, TDS should be deducted at a higher rate of 20 per cent. Also, buyers must verify the residency status of the seller. If the seller is a non-resident Indian (NRI), the tax rate is 20 per cent. So, if the buyer deducts a TDS of 1 per cent TDS, he will be held liable for underpayment.
