Paying TDS on Property: A Primer

In June 2013, the Indian government introduced new legislation mandating that taxes be deducted at source on any purchase of immovable property. According to the new Section 1941A TDS would be charged at 1%, and if the seller does not have a PAN, then the percentage goes up to 20%. These rules would be effective if the property’s cost was above Rs 50 lakhs.

Here, we give you a step by step guide on how to go about making these transactions and some important points to remember.

Steps to pay TDS online

• The tax has to be paid by the seller, and the buyer needs to deduct the TDS either when the sale deed is being executed or at the time of any advance payments.
• The buyer has to credit the TDS amount to the government via a form/challan called Form 26QB.
• If the property has more than one buyer and seller, the appropriate number of forms have to filled for each buyer as well as seller.
• The buyer can complete the payment online using the TIN NSDL website​.
• Once the TDS is deposited, the buyer has to wait for 15 days before he or she can download the TDS certificate or Form 16B, which needs to be given to the seller.
• The TDS certificate can be downloaded from the TDS Reconciliation Analysis and Correction Enabling System (TRACES) website.

Points to remember

• Both the seller and the buyer need to furnish their PAN details.
• Tax is calculated on the overall sale price and not solely on the amount above Rs 50 lakhs.
• It is the seller’s responsibility to verify the TDS amount in the Form 26AS annual tax statement, which provides details of all taxes deducted from your income.
• The tax rates will be different if the seller is an NRI and will be calculated under Section 195.
• Once the tax is deducted, the buyer has to file it with the government within 7 days using Form 26QB.
• If the property is paid for in instalments, each instalment will attract taxes.
• Agricultural land does not fall under the umbrella of these rules.

What happens if the buyer fails to deduct the TDS

The individual will then be considered as an assessee-in-default according to Section 201 of the Income Tax Act. He or she will be liable to pay 1% for every month the individual failed to deduct the TDS, and 1.5% for every month that he or she did not file the amount with the government.