TDS on Sale of Immovable Property | Section 194IA & Form 26QB

There are various provision related to TDS where tax is to be deducted at source at a given percentage either at the time of payment or at the time of credit, as the case may be e.g. TDS on salary, TDS on professional fees, TDS on Contract, TDS on rent etc. Here, we are going to discuss about TDS on sale of immovable property u/s 194IA and form required to be filled for this i.e. Form 26QB.

Applicability of form 26QB on residents & Non- residents

This provision is applicable on any person, whether a resident or a non-resident buying any immovable property (other than agricultural land) from a resident seller.

Who is required to deduct, threshold limit, time & rate of deduction

Where any person, whether resident or non-resident is buying any immovable property (other than agricultural land) from any resident seller, he shall deduct an amount equal to 1% of the sum, at the time of credit or at the time of payment of such sum, whichever is earlier to the account of the Central Government.

The payment can be made either through cash or by cheque or draft or by any other mode.

However, the provision shall not apply where immovable property is transferred for a consideration of less than Rs. 50 lakhs.

How to deposit tax to government through form 26QB

After TDS is deducted on payment for immovable property, a separate Form 26QB is required to be filed within a period of seven days from the end of the month in which such deduction is made. Form 26QB is a Challan-cum-statement. For filing this form, correct PAN of both the seller and buyer is to be provided.

Where PAN of the deductee is not available, the deductor is required to deduct TDS at higher of the following rates:

• The rate prescribed in the Act
• The rate in force
• At the rate of 20%

After Form 26QB is filed and TDS is deposited to the account of Central Government, an certificate in Form 16B is required to be furnished by the deductor to the deductee within fifteen days from the due date of furnishing of form 26QB. It is generated from the portal traces.gov.in. The buyer is not required to obtain TAN to deduct TDS and file Form 26QB, PAN is sufficient for the same.

Interest, late fee & Penalty on  form 26QB

Where the deductor either defaults in deduction or payment of TDS to the account of the Central government on or before the due date i.e within seven days from the end of the month in which such deduction is made, then such deductor shall be treated as “assessee in default” and shall be liable to pay interest before furnishing of Form 26QB. Following are the cases where interest is required to be paid.

• Where TDS has been deducted but not paid: Assessee is required to pay interest at the rate of 1.5% for every month or part of the month on such TDS amount. The interest amount is to be calculated from the date on which such TDS was deducted till the date such TDS is actually paid. 

• Where no TDS has been deducted: Assessee is required to pay interest at the rate of 1% for every month or part of the month on the amount of such TDS from the date on which such TDS was deductible till the date such TDS is deducted.

Where an assessee is unable to file form 26QB or delay in filing such form beyond the due date, he shall be liable to pay late fee u/s 234E. The late fee is Rs 200 per day for every day during which the failure to furnish the statement continues, however, the total fee cannot exceed the amount of TDS which is required to be deducted mentioned in the statement and this late fee should be deposited before filing of Form 26QB.

What happens to form 26QB in case of Multiple seller & buyers

Where there is involvement of multiple buyers and multiple sellers, then Form 26QB will be filled by all the buyers with respect to each seller for their proportionate share. Let us understand this with the help of an example,

• Suppose, there is a single buyer and 2 seller, Form 26QB is to be filed by buyers separately for each seller, i.e 2 Form 26QB will be filed. 

• Suppose, there are 2 buyers and 2 sellers, then 4 Form 26QB is required to be filled separately by both the buyers for both the sellers.

Form 16B indicates the details of tax deducted at source by the buyer of the seller and such deduction is also reflected in 26AS of the seller on the income tax site and seller can claim benefit of such deduction in his income tax return.

What happens in case of payment in installments

Where the payment is made in installments, the deductor is required to deduct TDS on payment of each such installment and submit tax to the government through Form 26QB within a period of seven days from the end of the month in which such deduction is made.

(The author is a CA in practice at Delhi and can be contacted at: E-mail: abhinandansethia90@gmail.com, Mobile: +91-9811741451))