TDS Filing on Sale of the Property: Requirements And Procedure

Last Updated at: March 18, 2020
361
file tds on the sale of property
  1. What is TDS and TDS on sale of a property?

  2. Requirements for TDS deduction on sale of property

  3. Paying TDS through form 26QB and obtaining form 16B

  4. TDS on sale of the property to NRI

  5. Conclusion

 

What is TDS?

TDS is abbreviated for tax deducted at source. According to the Income Tax Act 1961, if any payment is made above the limits of the amount set by the government, then the individual is liable to pay TDS. The TDS rates are set by the government and have to be paid according to the Income Tax slab rates. No TDS has to be submitted by the HUF or any individuals.

However, in the case of rents, the HUF and individuals are liable to make payments when the rent amount is more than ₹50,000/month at the rate of 5%. And in this case, they need not have their TAN (Tax Deduction and Collection Amount).

Additionally, in case, your income is less than the limit set by the government, form 15G and form 15H can be submitted to the bank so that no TDS amount is deducted from your income. In case, you were unable to submit the documents, a return along with the income tax statement can be provided to the bank to get the refund amount. The TDS can be deposited on the government portal through Challan ITNS-281. 

Types of TDS

There are mainly two types of TDS certificate, namely:

  • Annual TDS certificate: This certificate is issued annually for the TDS on salary. The TDS certificate is also named as form 16, and for the employees having a salary less than Rs. 2,50,000, TDS is not applicable.
  • Quarterly TDS certificate: This certificate is issued on the income apart from salary. This TDS certificate comes under form 16A, and the TDS amount is deducted from the interest that is provided by the banks. 

What is TDS on sale of a property?

Under section 194A, any individual purchasing a property of more than 50 lacs has to pay 1% TDS on sale of a property. TDS on the sale of immovable property was brought into effect on 1st July 2013 by the finance minister with the sole motive of removing black marketing and corruption in the real estate industry, and bringing transparency in the process of TDS on sale of a property. This also aims at the complete removal of the involvement of any third party to pay the taxes. 

The TDS on the sale of immovable property has to be paid online or offline through form 26QB and further form 16B has to be submitted to the seller as a documented proof of the TDS payment and deductions. 

Requirements for TDS deduction on sale of property

Under section 194IA, certain things have to be considered while filing the TDS on the sale of immovable property. These include:

  • 1% of the total amount (e.g., ₹70,000 for 70 lacs) has to be deducted by the buyer.
  • No TDS amount will be deducted when the sales amount is below 50 lacs.
  • As per the union budget 2019, all the additional charges including parking fee, electricity fee or membership fee, has to be included in the TDS deduction on sale of the property, for the sales of the immovable property. 
  • If the amount is paid in instalments, the TDS amount is deducted for each instalment at the specified rates. 
  • The TAN (Tax Deduction Account Number) is not mandatory to make the payment for TDS on the sale of immovable property, however, it is mandatory to have a PAN, failing which TDS amount cannot be paid. 
  • However, the PAN of both the buyer and the seller has to be compulsorily submitted, else the TDS amount deduction will be at 20%.
  • Once the TDS deduction on the sale of the property is done, it is mandatory to submit Form 16B as the TDS certificate to the seller within 10-15 days of the deduction.
  • In case, there is more than one seller or buyer, the TDS will still be applicable at similar rates and will have to be paid by both (buyers) equally. 
  • The form 26QB and form 16B has to be submitted to the government within 30 days of TDS deduction. 

E-file Your Income Tax Returns

Paying TDS through form 26QB

In the payment of TDS on sale of the property section, the payment can be done easily both through online and offline methods, in a few easy steps. The process for payment of TDS deduction on sale of property includes:

  • Visit the portal of income tax department through the link
  • On this page, open the option of form 26QB.
  • Further on the next page, you have to choose from two options, i.e., corporate payer or non-corporate payer. In the case of the corporate payer, code 0020 has to be chosen and for the non-corporate payer, 0021 has to be chosen. 
  • Next, you are provided with two payment options, i.e., online through net-banking or offline through banks. For the offline, a receipt with an acknowledgement number is provided with a validity of 10 days.

Downloading form 16B

To obtain the form 16B for TDS on sale of property section, one needs to register themselves first on the TRACES portal. After the registration is completed, the TDS certificate will be reflected on the portal, which can then be submitted to the seller. The procedure for downloading form 16B for TDS on the sale of immovable property is as follows:

  • Login on the TRACES portal.
  • Under the download section, click on the option of ‘Form 16B’ (for the buyer).
  • Next, enter the PAN details of the seller along with the acknowledgement number, then click on the ‘Proceed’ option.
  • Next, verify all details and click on the ‘Submit Request’ option.
  • Now that, the request is processed. 
  • After the submission, the form 16B is available to download in the form of a .zip file.
  • After downloading, one needs to enter the password to open the document. The password is the DOB of the applicant. 

TDS on sale of the property to NRI

Under the TDS on sale of property section, separate rates have to be paid in case of TDS on the sale of the property to NRI. When a property is sold by an NRI, the tax has to be paid on the number of gains by the NRI. For the tax payable, there are mainly two types of gains, namely short term gains and long term gains. 

Short-term gains: When the property is sold within 2 years after it is bought, it is called a short-term gain. The buyer is liable to pay 30% of the TDS on the sale of the property to NRI in this case.

Long-term gains: When the property is sold 2 years after it is bought, it is called long-term gains. The buyer is liable to pay 20% of TDS on the sale of the property to NRI in case of long term gains.

In the case of inheritance as well, the individual is liable to pay a certain amount of taxes as per the rates set by the income tax slab.

Saving tax on capital gains

The deductible tax percentage might seem quite high to some individuals, and so, to help reduce the tax amount that needs to be paid to the government, there are 3 ways of exemptions from the taxes, which include:

  • Section 54: This exemption is possible in the case of long term capital gains. Under this, the price of the new property purchased has to be higher than the earlier one, and the exemption will be available only on the gain amount. Investment can also be made in the gains of a property under construction. However, this is liable only for 3 years.
  • Section 54F: This exemption is also possible in the case of long term capital gain obtained on the sale of a residential property or a capital asset. 
  • Section 54EC: Under this, the exemption from the taxes can be availed by investing the amount in bonds. For this purpose, the bonds issued by the National Highway Authority of India (NHAI) and Rural Electrification Corporation (REC) have been specified. The bonds so purchased are redeemable only after 5 years. 

Conclusion

The TDS on sale of property section might seem like an added liability to most of the property buyers, however, it is essential for transparency in the government. Further, special considerations have to be made by the NRIs while selling their property. To avail the exemptions from the tax liabilities, the individuals must follow all the rules according to the ways specified by the government. Lastly, it is mandatory for all the people having the threshold income to pay the TDS amount, else they will be liable to pay penalty under section 234E and 271H, including late fee submission charges as well.

 

0

TDS Filing on Sale of the Property: Requirements And Procedure

361
  1. What is TDS and TDS on sale of a property?

  2. Requirements for TDS deduction on sale of property

  3. Paying TDS through form 26QB and obtaining form 16B

  4. TDS on sale of the property to NRI

  5. Conclusion

 

What is TDS?

TDS is abbreviated for tax deducted at source. According to the Income Tax Act 1961, if any payment is made above the limits of the amount set by the government, then the individual is liable to pay TDS. The TDS rates are set by the government and have to be paid according to the Income Tax slab rates. No TDS has to be submitted by the HUF or any individuals.

However, in the case of rents, the HUF and individuals are liable to make payments when the rent amount is more than ₹50,000/month at the rate of 5%. And in this case, they need not have their TAN (Tax Deduction and Collection Amount).

Additionally, in case, your income is less than the limit set by the government, form 15G and form 15H can be submitted to the bank so that no TDS amount is deducted from your income. In case, you were unable to submit the documents, a return along with the income tax statement can be provided to the bank to get the refund amount. The TDS can be deposited on the government portal through Challan ITNS-281. 

Types of TDS

There are mainly two types of TDS certificate, namely:

  • Annual TDS certificate: This certificate is issued annually for the TDS on salary. The TDS certificate is also named as form 16, and for the employees having a salary less than Rs. 2,50,000, TDS is not applicable.
  • Quarterly TDS certificate: This certificate is issued on the income apart from salary. This TDS certificate comes under form 16A, and the TDS amount is deducted from the interest that is provided by the banks. 

What is TDS on sale of a property?

Under section 194A, any individual purchasing a property of more than 50 lacs has to pay 1% TDS on sale of a property. TDS on the sale of immovable property was brought into effect on 1st July 2013 by the finance minister with the sole motive of removing black marketing and corruption in the real estate industry, and bringing transparency in the process of TDS on sale of a property. This also aims at the complete removal of the involvement of any third party to pay the taxes. 

The TDS on the sale of immovable property has to be paid online or offline through form 26QB and further form 16B has to be submitted to the seller as a documented proof of the TDS payment and deductions. 

Requirements for TDS deduction on sale of property

Under section 194IA, certain things have to be considered while filing the TDS on the sale of immovable property. These include:

  • 1% of the total amount (e.g., ₹70,000 for 70 lacs) has to be deducted by the buyer.
  • No TDS amount will be deducted when the sales amount is below 50 lacs.
  • As per the union budget 2019, all the additional charges including parking fee, electricity fee or membership fee, has to be included in the TDS deduction on sale of the property, for the sales of the immovable property. 
  • If the amount is paid in instalments, the TDS amount is deducted for each instalment at the specified rates. 
  • The TAN (Tax Deduction Account Number) is not mandatory to make the payment for TDS on the sale of immovable property, however, it is mandatory to have a PAN, failing which TDS amount cannot be paid. 
  • However, the PAN of both the buyer and the seller has to be compulsorily submitted, else the TDS amount deduction will be at 20%.
  • Once the TDS deduction on the sale of the property is done, it is mandatory to submit Form 16B as the TDS certificate to the seller within 10-15 days of the deduction.
  • In case, there is more than one seller or buyer, the TDS will still be applicable at similar rates and will have to be paid by both (buyers) equally. 
  • The form 26QB and form 16B has to be submitted to the government within 30 days of TDS deduction. 

E-file Your Income Tax Returns

Paying TDS through form 26QB

In the payment of TDS on sale of the property section, the payment can be done easily both through online and offline methods, in a few easy steps. The process for payment of TDS deduction on sale of property includes:

  • Visit the portal of income tax department through the link
  • On this page, open the option of form 26QB.
  • Further on the next page, you have to choose from two options, i.e., corporate payer or non-corporate payer. In the case of the corporate payer, code 0020 has to be chosen and for the non-corporate payer, 0021 has to be chosen. 
  • Next, you are provided with two payment options, i.e., online through net-banking or offline through banks. For the offline, a receipt with an acknowledgement number is provided with a validity of 10 days.

Downloading form 16B

To obtain the form 16B for TDS on sale of property section, one needs to register themselves first on the TRACES portal. After the registration is completed, the TDS certificate will be reflected on the portal, which can then be submitted to the seller. The procedure for downloading form 16B for TDS on the sale of immovable property is as follows:

  • Login on the TRACES portal.
  • Under the download section, click on the option of ‘Form 16B’ (for the buyer).
  • Next, enter the PAN details of the seller along with the acknowledgement number, then click on the ‘Proceed’ option.
  • Next, verify all details and click on the ‘Submit Request’ option.
  • Now that, the request is processed. 
  • After the submission, the form 16B is available to download in the form of a .zip file.
  • After downloading, one needs to enter the password to open the document. The password is the DOB of the applicant. 

TDS on sale of the property to NRI

Under the TDS on sale of property section, separate rates have to be paid in case of TDS on the sale of the property to NRI. When a property is sold by an NRI, the tax has to be paid on the number of gains by the NRI. For the tax payable, there are mainly two types of gains, namely short term gains and long term gains. 

Short-term gains: When the property is sold within 2 years after it is bought, it is called a short-term gain. The buyer is liable to pay 30% of the TDS on the sale of the property to NRI in this case.

Long-term gains: When the property is sold 2 years after it is bought, it is called long-term gains. The buyer is liable to pay 20% of TDS on the sale of the property to NRI in case of long term gains.

In the case of inheritance as well, the individual is liable to pay a certain amount of taxes as per the rates set by the income tax slab.

Saving tax on capital gains

The deductible tax percentage might seem quite high to some individuals, and so, to help reduce the tax amount that needs to be paid to the government, there are 3 ways of exemptions from the taxes, which include:

  • Section 54: This exemption is possible in the case of long term capital gains. Under this, the price of the new property purchased has to be higher than the earlier one, and the exemption will be available only on the gain amount. Investment can also be made in the gains of a property under construction. However, this is liable only for 3 years.
  • Section 54F: This exemption is also possible in the case of long term capital gain obtained on the sale of a residential property or a capital asset. 
  • Section 54EC: Under this, the exemption from the taxes can be availed by investing the amount in bonds. For this purpose, the bonds issued by the National Highway Authority of India (NHAI) and Rural Electrification Corporation (REC) have been specified. The bonds so purchased are redeemable only after 5 years. 

Conclusion

The TDS on sale of property section might seem like an added liability to most of the property buyers, however, it is essential for transparency in the government. Further, special considerations have to be made by the NRIs while selling their property. To avail the exemptions from the tax liabilities, the individuals must follow all the rules according to the ways specified by the government. Lastly, it is mandatory for all the people having the threshold income to pay the TDS amount, else they will be liable to pay penalty under section 234E and 271H, including late fee submission charges as well.

 

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