TDS Provisions on Buying Immovable Property from Resident Seller

 1. Introduction:-

As per Finance Act of 2013, TDS is required to be deducted on transfer of Immovable property, wherein the consideration of the property exceeds or is equal to Rs 50 lakhs.

TDS is required to be deducted under section 194IA.

For all such transactions w.e.f 1^st June 2013, tax @ 1% is required to be deducted by the buyer of the property at the time of making the payment of sale Consideration.

2. Important Points need to consider:-

• No requirement for procuring the Tax Deduction Number (TAN) Number for tax deduction and payment of TDS under this section.
• Limit of Rs. 50 lakhs is applicable on total sales consideration of property and will not apply to different sellers individually. For example- If there are two sellers and the payment of Rs. 30 lakhs is required to be made to each seller then TDS is required to be deducted since the payment is more than Rs. 50 lakhs in totality.
• Tax is required to be deducted at the time of payment either it is payment of entire amount or in the installment. If the payments are being made in installments then at the time of every installment.
• Tax is required to be deducted under Section 194-IA only if the seller is resident even if the property is situated outside India.
• If some amounts have been paid to the seller before 1st June 2013 then TDS is required to be deducted on the balance amount. Either the balance amount is less than Rs. 50 lakhs or more than 50 lakhs. This rule is applicable if the consideration of the property exceeds or is equal to Rs. 50 lakhs. No TDS is required to be deducted on the installments paid before 1^st June 2013.
• TDS Deducted under this section is required to be paid to the government within a period of 7 days from the end of the month in which the deduction is made.
• TDS is required to be deposited through a Challan- cum-statement in Form No. 26QB.
• Person shall furnish the Certificate of deduction of tax at source in Form No. 16B to the seller within 15 days from the due date of filing the form 26QB.
• No TDS is required to be deducted if transfer is of Rural Agricultural land (which is not a capital asset).

3. Interest on Default of TDS Payment:-

Interest is payable under Section 201 of the Income Tax Act, 1961. Such Interest shall be payable before furnishing the Form 26QB.

• If TDS Deducted but not paid – 1.5% for every month or part of the month on the TDS amount from the date on which TDS was deducted till the date on which such TDS was actually paid.
• If TDS not deducted – 1% for every month or part of the month on TDS amount from the date on which TDS was deductible to the date on which such TDS is deducted.

4. Late fee and penalty on default in furnishing 26QB:-

• Late Fee – If form 26QB is not filed within the time limit then the fees shall be levied under Section 234E. It shall be liable to pay a fee of Rs. 200 per day till he file the form 26QB.
• Penalty – If form 26QB is not filed or late filed then the penalty can be levied under Section 271H. The deductor shall be liable to pay penalty of minimum Rs. 10,000 to Rs. 1,00,000. It is not mandatory; it may be levied by the Assessing Officer.