TDS on Immovable Property – Then and Now
One of the modes of tax collection for the Government is in the form of Tax Deduction at Source. Chapter XVII of Income Tax Act, 1961, (Old Act) provides for collection and recovery of tax. Part-B of Chapter XVII deals with the Deduction of Tax at source. Under Income Tax Act, 2025, (New Act) Section 393 provides for deduction of tax at source.
Under the Old Act, the TDS provisions were spread across various section starting from Section 192 to Section 196D. TDS provisions under the New Act, have been simplified and instead of each section for each type of payment, a Table has been provided under the New Act, which specifies the rates of TDS for different types of payments.
TDS on Immovable Property under the Old Act:
Section 194IA – TDS in respect of immovable property where the transferor is a Resident:
Section 194IA contains provisions for deduction of tax at source in respect of transfer of an immovable property by a resident transferor. Where the transferor is a non-resident, the provisions of Section 194IA are not applicable. The transferee of the immovable property has to comply with the provisions of Section 195 in these cases.
Threshold Limit: Sub-section (2) of Section 194IA provides that the liability to deduct tax at source arises when the consideration for the transfer of immovable property is Rs. 50.00 Lakhs or more. This limit is subject to the stamp duty value of the property as notified by the State Government of the concerned State in which the property is situated. In a case where the sale consideration is less than Rs. 50.00 Lakhs, but the Stamp Duty Value is more than Rs. 50.00 Lakhs, in such case, for the purpose of deduction of tax at source, the Stamp Duty Value is to be considered.
The provisions of this section are not applicable in respect of an immovable property being the agricultural land. For the definition of “Agricultural Land”, one may refer to the definition of Capital Asset as per Section 2(14) Of the Old Act.
The value of the property shall also include all charges like club membership fee, car parking fee, utilities facility fee, maintenance fee, advance fee or any other amount which are incidental to transfer of the immovable property.
Multiple Buyers – Each buyer’s share is less than Rs. 50.00 Lakhs: There may be a situation where there are more than one buyer, and the amount payable by each of them may be less than Rs. 50.00 Lakhs. A doubt arises as to whether the TDS is applicable in such a case. Section 194IA clearly states that the TDS is applicable where the value of the property is Rs. 50.00 Lakhs or more. Therefore, where the consideration for the transfer of property is 50.00 Lakhs or more, even though each individual buyer’s share is less than Rs. 50.00 Lakhs, the TDS provisions are squarely applicable. Each buyer should remit his part of TDS and submit Form 26QB for giving credit of the TDS to the seller of the property.
Multiple Sellers – If the property is co-owned by 2 or more persons, the TDS under section 194IA is to be made as per the share of consideration payable to each transferor of the property. In such cases for each transferor, separate Form 26QB shall be submitted. Also remittance of TDS should not be done in a single challan & is to be done in different challans.
Requirement of TAN: Provision of section 203A of the Old Act, is not applicable in respect of TDS under section 194IA. The person responsible for deduction of tax at source is not required to obtain a Tax Deduction Account Number (TAN). The remittance of the TDS is to be done through the PAN of the buyer. The challan for payment of the TDS contains the name of the buyer and not that of the seller. The TDS so remitted by the transferor of the property is transferred to the PAN of the transferor through a statement in Form 26QB.
PAN-AADHAAR Linkage: Every deductor to be careful while applying the TDS rate in respect of acquisition of the immovable property. The general rate of TDS is 1% of the value of the consideration. However this rate of TDS is subject to PAN and Aadhaar linking status of the transferor of the property. If the transferor has not linked his aadhaar number to PAN, then the deductor should apply higher rate of TDS, which is 20% of the consideration.
Belated Remittance of TDS & Filing of Form 26QB: The Tax Deducted at source by the transferee shall be deposited within the end of the following month of the month in which the tax is deducted. For delay in payment of TDS, interest at the rate of 1.5% per month or part thereof is payable. Also under section 234 E, late fee of Rs. 200 per day becomes payable for non-submission of Form 26QB. However the maximum late fee under section 234E shall not exceed the amount of the tax deducted at source. Also there may be a possibility of levy of penalty under section 271H of the Old Act for not furnishing the statement in From 26QB or incorrectly furnishing of the said statement.
TDS in respect of immovable property held as stock in trade: It was being argued by the builders and developers that the provisions of section 194IA are not applicable for immovable property held as stock in trade. However the decisions of various ITAT’s and courts held that irrespective of the nature of the property, the provisions of section 194IA are applicable and hence the transferees are liable to deduct tax at source.
Applicability of TDS provisions where transferor is a non-resident: Where the transferor is a non-resident, the requirement of TDS under section 194IA is not applicable. However the Tax is to be deducted under section 195 of the Old Act. As per section 195, the tax is required to be deducted on the entire sale consideration at specified rates. If the asset is Long Term Capital Asset, the rate of TDS is at 12.5% of the entire consideration along with surcharge, as applicable, and SHEC at the rate of 4% of the tax and surcharge. In respect of the acquisition of property from a non-resident, the transferee shall obtain a TAN Number and the file a statement (Quarterly) in Form 27Q.
Applicability of TDS provisions under New Act:
Under the New Act, the principles and rules regarding the TDS on property transactions has not been changed much. Under the New Act, instead of Form 26QB, Form No 141 is applicable. In the case of purchase of the property from a Non-Resident Section 393(2) Table Sl. No. 17 provides for TDS on transfer of property. The TDS made shall be reported in Form 144 (Equivalent to Form 27Q under Old Act) on quarterly basis. Filing of Form 144 on quarterly basis is applicable in respect of TDS made till 30th September 2026. From 1st October 2026 onwards obtaining TAN and filing of quarterly returns is dispensed with. The TDS will be deposited to the credit of the Central Government through PAN of the transferee.
The simplified procedure effective from 1st October 2026 is a welcome move by the Government. It has reduced the burden of the buyers of the property to a great extent. It is a sigh of relief to the buyers of the property.
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