Section 194IA – How to File TDS on Sale of Property
When buying a property in India, tax compliance is a crucial aspect. If the property value exceeds ₹50 lakh, the buyer is legally required to deduct 1% TDS (Tax Deducted at Source) and deposit it with the government. The entire process can be completed online, making it convenient for buyers to fulfill their tax obligations without visiting a bank or tax office.
This blog will guide you through the importance, process, and key considerations for online TDS payment on property purchases.
What is TDS on Property?
TDS on property is a tax deducted at source under Section 194IA of the Income Tax Act, 1961. It ensures that the seller’s capital gains tax liability is recorded and reported to the government.
Who Needs to Pay TDS on Property?
- Buyer: It is the buyer’s responsibility to deduct 1% TDS from the total property value and deposit it with the government.
- Seller: The seller will receive the property payment after TDS deduction and must report it in their income tax return.
- Non-Resident Sellers (NRI Sellers): If the seller is an NRI, the TDS rate is higher (typically 20% or more) and needs to be calculated as per capital gains tax rules.
How to Pay TDS on Property Online?
Follow these step-by-step instructions to pay TDS on property using the Income Tax Department’s online portal.
Step 1: Visit the Online Payment Portal
- Go to the TIN NSDL website or the Income Tax e-filing portal.
- Select e-Payment of Taxes.
Step 2: Choose the Correct Challan Form
- Select Challan 26QB (for TDS on property transactions).
- Enter details such as:
- Buyer’s PAN & Seller’s PAN (both must be valid).
- Full property value and TDS amount (1% of the total property price).
- Date of agreement or payment.
- Buyer’s and seller’s address details.
Step 3: Make the Payment
- Choose a payment method:
- Net banking
- Debit card
- NEFT/RTGS (for high-value payments)
- Complete the transaction and save the Challan 26QB receipt as proof.
Step 4: Download Form 16B for Seller
- After successful payment, visit the TRACES (TDS Reconciliation Analysis and Correction Enabling System) portal.
- Download Form 16B and issue it to the seller as proof of tax deduction.
Requirements of Section 194IA
When a buyer buys immovable property (i.e. a building or part of a building or any land other than agricultural land) costing more than Rs 50 lakhs, he has to deduct tax at source (TDS) when he pays the seller. This has been laid out in Section 194-IA of the Income Tax Act since 1st June 2013.
- The buyer has to deduct TDS at 1% of the total sale amount. Please note, the buyer is required to deduct TDS, not the seller
- TDS is required to be deducted only if total purchase value is Rs 50 lakh or more
- If the payment is made by instalments, then TDS has to be deducted on each instalment paid.
- ‘Consideration for immovable’ property shall include all charges like nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to the transfer of the immovable property. This is applicable for immovable property purchased on or after 1 September 2019.
- TDS is to be paid on the entire purchase value.
Example for TDS on Sale of Property, if you have bought a house at Rs 55lakh, you have to pay TDS on Rs 55 lakh and not on Rs 5 lakh (i.e. Rs 55 lakh – Rs 50 lakh). This is applicable even when there is more than 1 buyer or seller. Post the budget 2019 amendment to section 194-IA, in the above example, if on 1 September 2019, you have paid Rs 2 lakh towards parking fee, Rs 1 lakh for water facility fee and Rs 1 lakh for electricity fee, your sale consideration would be Rs 59 lakh (55+2+1+1). You will have to pay TDS on Rs 59 lakh @ 1%. Your TDS payable would be Rs 59,000. - Buyer of the property need not obtain a TAN (Tax Deduction Account Number) for depositing TDS with the government. You can make the payment using your PAN.
- For the purpose of depositing TDS, buyer will have to obtain the PAN of the seller, else TDS must be deducted at 20%.
- TDS is deducted at the time of payment (including instalment payments) to the seller
- The TDS on the immovable property has to be paid using Form 26QB within 30 days from the end of the month in which TDS was deducted.
- After depositing TDS to the government, the buyer is required to furnish the TDS certificate in form 16B to the seller. This is available around 10-15 days after depositing the TDS. The buyer is required to obtain Form 16B and issues the form to the seller. You can check the procedure to generate and download Form16B from TRACES
Key Points to Remember
✔️ TDS rate is 1% of the total property value (if above ₹50 lakh).
✔️ TDS must be deposited within 30 days from the month of payment to avoid penalties.
✔️ Both buyer & seller PAN details must be correctly mentioned.
✔️ Penalty for Non-Compliance: Failure to deduct or deposit TDS on time can lead to interest and penalties imposed by the Income Tax Department.
Why is Online TDS Payment on Property Important?
✅ Prevents Tax Evasion: Helps track real estate transactions and ensures the seller’s capital gains are recorded.
✅ Easy & Secure: Online payment eliminates the need for physical tax filing and paperwork.
✅ Legal Compliance: Avoids interest and penalties under the Income Tax Act.
✅ Instant Confirmation: You receive a payment acknowledgment immediately, which can be used for documentation.
Need Expert Help?
Navigating TDS on property transactions can be confusing, especially for first-time buyers. If you need professional assistance in filing TDS, consult Saptax Hub LLP, a reliable CA firm in Delhi specializing in TDS payments, tax filing, and compliance services.
Final Thoughts
Paying TDS on property purchases is a straightforward but crucial process. As a buyer, ensure you comply with the tax requirements to avoid penalties. Follow the steps above, make the payment online, and issue Form 16B to the seller for a smooth transaction.
For expert guidance on TDS filing and real estate tax compliance, connect with Saptax Hub LLP – Your Trusted CA Firm in Delhi!
