TDS on Property Sale is one of the progressive steps to regulate the real estate sector. Last decade or so has seen lot of reforms in Real Estate sector like computerization of land records, it’s now mandatory to quote PAN for property transactions & historical judgement by Supreme Court to ban all property transactions through Power of Attorney. Despite all such efforts still 40% property transactions don’t carry PAN details & almost all property transactions are undervalued / under reported. To fix this anomaly, In 2013-14 union budget Govt introduced section 194IA. Under this section w.e.f. June 01, 2013 for all immovable property transactions over Rs 50 lac, It is compulsory to deduct TDS on Property Sale @ 1% of Total Transaction Value. Agriculture land in notified Rural areas is kept out of this provision. This Tax is called Withholding Tax.
The biggest hassle or concern raised was that to deduct TDS & deposit TDS with Govt, buyer need to obtain TIN as it is mandatory to quote TIN for deducting & deposit TDS with Govt Treasury. Later Govt introduced sub section (3) under section 194IA that to deduct TDS on property sale & deposit the same, it is not mandatory to obtain & quote TIN. The seller or builder will get the amount net off TDS on Property Sale from Bank/Buyer. Buyer will deposit the TDS with Govt without TIN.
TDS on Property – Critical Points
1. The responsibility to deduct TDS on Property Sale rests solely with the Buyer even if it is financed by Home Loan or property is purchased from the builder. In some cases, Bank can deduct TDS on property from disbursement and help in depositing TDS on buyers behalf but they are not obliged to do so. You have to give written request to Bank for the same.
2. TDS on Property Sale should be deposited with Govt by the Buyer within 7 days from the end of the month in which the TDS is deducted.
3. While depositing TDS on Property Sale, it is mandatory to Quote both Buyer and Seller’s PAN.
4. Non-deduction of TDS or Non Deposit of TDS may attract a heavy penalty.
5. TDS should be deducted at the time of payment to the seller. If the payment is in installments than TDS should be deducted with each installment. If the entire amount is paid in single installment than entire TDS amount should be deducted at the time of making complete payment.
6. TDS on Property Sale can be deposited with Govt by filing Form 26QB Challan.
7. All details related to property transaction should be furnished in form 26QB
8. You can deposit TDS online through following link
https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
9. After depositing TDS on property sale with Govt, the buyer needs to issue TDS certificate to the Seller. TDS Certificate is referred as form 16B. It is available online after 10-14 days from the date of deposit of TDS. TDS certificate can be downloaded online from following link
http://contents.tdscpc.gov.in/
Penalty for Delay in TDS Filing
1. Penalty u/s 201
(a) 1% interest for the delay of every month i.e. Late deduction of tax from the date the tax was deductible to the date the TDS is deducted.
(b) 1.5% penalty for every month on account of late payment of TDS deducted to Govt. from the date TDS was deducted till the actual date of payment.
* Interest calculated will be simple interest. The fraction/part of the month is considered as full month.
2. Penalty u/s 234E ##
(a) Late fee penalty of Rs 200 per day for late filing of the statement of Tax Deducted at Source. Late fee penalty will be lower of TDS Amount or Delay in No of Days X Rs 200. For example, if TDS Amount is Rs 15,000 and delay are of 100 Days then the late fee is 100 X Rs 200 i.e. Rs 20,000. Lower of Rs 15,000 and Rs 20,000 is Rs 15,000 therefore max late fee penalty is Rs 15,000. In Short, max late fee penalty cannot exceed TDS Amount.
## Added on Mar 30, 2015 post clarification / intimation from Income Tax Department.
FAQ’s
(A) Question: One of my reader Mrs. Rajput signed sale agreement on April 14, 2013 i.e. before June 01, 2013. She asked me, Is the new provision applicable in her case also?
Answer to this query is that this provision is linked to the date of payment, not to the date of agreement. If the agreement is signed before June 01, 2013 but either full payment or even part payment is due/made on or after June 01, 2013 than also she need to deduct TDS on property sale & deposit with Govt. This applies to under construction property also, on the payment/amount due on or after June 01, 2013. Please note that TDS is applicable only on amount due/payable on or after June 01, 2013 but not on the amount already paid before June 01, 2013.
(B) Question: Mr. Sunil Parte bought property worth 1.5 Cr in Oct, 2010 and his amount due on or after June 01, 2013 is just 40 lacs i.e. less than 50 lacs. Is he liable to deduct Withholding Tax?
Answer is Yes, even if amount due is only 40 Lacs which is less than 50 lacs on or after June 01, 2013 but since total property value is more than 50 lacs i.e. 1.5 Cr, the buyer is liable to deduct TDS on property sale and deposit with Govt. TDS will be deducted only on 40 Lacs instead of 1.5 Cr i.e. only on the amount payable on or after June 01, 2013.
(C) Question: Ms. Namita Khurana is an NRI and recently she purchased the property in Gurgaon, She asked me, whether she also needs to deduct TDS on Property Sale and deposit with Govt.
Answer is Yes, Section 194IA is applicable for Seller who is Resident Indian. In this case, the buyer is NRI but the seller is Resident Indian therefore TDS u/s 194IA is applicable.
(D) Question: Mr. Rajpal is planning to buy an independent house in Haryana and his seller does not have PAN than what he should do?
Answer is Mr. Rajpal should deduct TDS @ 20% as per section 206AA of Income Tax Act If the seller does not have PAN.
(E) Question: What if multiple buyers or sellers involved in property transaction
Answer is TDS on property sale is deducted on total consideration irrespective of No of Buyers or Sellers & their respective contribution in the property. If the property value is more than 50 Lacs than irrespective of No. of Buyer or Sellers, TDS will be deducted by Buyer/s. All Buyers/Sellers will fill/receive separate forms/TDS certificates.
For the benefit of my readers, i have downloaded E-Tutorial from NSDL Website on how to make online payment of TDS on Property Sale. You may download the same from following link
E-Tutorial TDS on Property Sale
Update March 30, 2015: Recently, CPC-TDS has issued intimation u/s 200A of the Income Tax, 1961. This intimation is an imposition of penalty for the delay in filing of TDS on Property u/s 194IA. As i mentioned in my post that interest penalty u/s 201 is levied for the delay in filing of TDS on Property. In the latest intimation, CPC-TDS has also imposed a penalty of Rs 200 per day for the delay in TDS filing u/s 234E. This penalty is a shocker for late payers. I am flooded with queries on penalty. As i studied the Income Tax intimation in detail, i am sharing the justification / clarification of penalty u/s 234E by IT department.
Justification / clarification of Penalty u/s 234E by IT Department: Penalty u/s 234E is levied for late filing of the statement of TDS / TDS Return. As the name suggests Form 26QB is referred as Challan. Therefore, common understanding was that only interest penalty u/s 201 is applicable for the delay in filing of challan. While imposing penalty CPC-TDS has invoked Rule 31A(4A) of IT Act, 1961, Which mention that Form No 26QB for filing of TDS on Property is not only a Challan but challan cum statement of TDS u/s 200(3) i.e. 26QB is Challan cum TDS Return.
In Short, besides Challan form no 26QB is also treated as Statement of TDS / TDS Return therefore besides interest penalty, late fee of Rs 200 per day u/s 234E is applicable on delay in filing of TDS on property u/s 194IA. Late fee penalty cannot exceed TDS amount.
Update May 01, 2015:
To pay the penalty, a link is available on the TDS payment page as shared by me under point no 8. The link heading is “Demand Payment“. This link is only for the payment of demand against the TDS on Sale of the Property. You need following details to pay the penalty
(a) PAN of a Buyer
(b) PAN of a Seller
(c) Acknowledgement No. of the Challan
(d) Assessment Year
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