TDS on Sale of Property (26 QB)

 Introduction:

• Form 26QB is a challan-cum-statement used for the payment of Tax Deducted at Source (TDS) on the sale of immovable property. Under Section 194-IA of the Income Tax Act, TDS must be deducted by the buyer when purchasing an immovable property (other than agricultural land) if the sale consideration exceeds ₹50 lakhs.

2. Applicability:

• Who Must Deduct TDS: The buyer of the property is responsible for deducting TDS at the time of payment to the seller.
• Threshold Limit: TDS is applicable if the sale consideration of the property exceeds ₹50 lakhs.
• Property Type: The provision applies to the sale of immovable property, which includes buildings and land (excluding agricultural land).

3. Rate of TDS:

• TDS is deducted at the rate of 1% of the total sale consideration.

4. Time of Deduction:

• TDS must be deducted at the time of making the payment (either in full or in installments) to the seller.

5. Payment and Filing of Form 26QB:

• Challan-Cum-Statement: Form 26QB serves both as a challan for TDS payment and a statement of the transaction. It must be filed within 30 days from the end of the month in which TDS is deducted.
• Online Payment: The TDS amount can be paid online through the TIN NSDL website.

6. Issuance of TDS Certificate (Form 16B):

• After paying TDS and filing Form 26QB, the buyer must provide a TDS certificate in Form 16B to the seller within 15 days from the due date of filing Form 26QB.

7. Steps to File Form 26QB:

• Step 1: Visit the TIN NSDL website.
• Step 2: Select Form 26QB for TDS on property.
• Step 3: Fill in the details such as PAN of the buyer and seller, property details, sale consideration, and the TDS amount.
• Step 4: Make the TDS payment online through net banking or generate a challan for offline payment.
• Step 5: After successful payment, download the acknowledgment receipt.
• Step 6: Generate Form 16B from the TRACES portal and issue it to the seller.

8. Key Considerations:

• PAN Requirements: Both the buyer and the seller must provide their PAN for filing Form 26QB.
• Single or Multiple Transactions: TDS is deducted on the entire sale consideration. In cases with multiple buyers or sellers, each buyer must deduct TDS on their share of the sale consideration.
• Documentation: Buyers should maintain records of the sale agreement, payment receipts, and Form 16B for compliance purposes.

9. Consequences of Non-Compliance:

• Interest: Interest is charged for late deduction and late payment of TDS. The rate is 1% per month for late deduction and 1.5% per month for late payment.
• Penalties: Penalties may be imposed for failure to file Form 26QB and for failure to issue Form 16B to the seller.

10. Exemptions:

• No TDS is required if the sale consideration is ₹50 lakhs or less.
• Agricultural land is exempt from TDS under Section 194-IA.

11. Importance for Buyers and Sellers:

• For Buyers: Ensures compliance with tax laws and avoids penalties. Also, provides legal documentation of tax payment.
• For Sellers: Helps in tax filing as TDS credit is available based on the TDS certificate (Form 16B) issued by the buyer.

12. Examples:

• Single Buyer and Seller: If a buyer purchases a property worth ₹70 lakhs, they will deduct TDS of ₹70,000 (1% of ₹70 lakhs).
• Multiple Buyers and Sellers: For a property worth ₹1 crore with two buyers and two sellers, each buyer must deduct TDS on their respective share of the sale consideration.

Understanding the provisions of TDS on the sale of property and correctly filing Form 26QB ensures compliance with tax regulations and prevents legal and financial complications. If you need more specific details or have further questions, feel free to ask