TDS on Sale of Property in India – Simplified

In case of Sale of Property by Residents

IN case of sale of immovable property by the residents in India buyer is required to deduct tax @ 1% u/s 194 IA of Income Tax Act, 1961 on sale consideration if value of property exceeds Rs. 50 Lacs.

TDS shall also be deducted in case of payment of advance for property or in case or payment in installments whether or not advance payment or installment exceeds the prescribed threshold limit of Rs. 50 Lacs.

Form 26QB

Further, the buyer is also required to submit Form 26QB.

The online form available on the TIN website for furnishing information regarding TDS on property is termed as Form 26QB . https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp

As per the CBDT notification no. 30/2016 dated April 29, 2016, the due date of payment of TDS on transfer of immovable property has been extended to thirty days (from existing seven days) from the end of the month in which the deduction is made.

Example: If a taxpayer has made payment of sale consideration in the month of February, then corresponding TDS should be deposited on or before (thirty days) March 30th.

Form 16B

Form 16B is the TDS certificate to be issued by the deductor (Buyer of property) to the deductee (Seller of property) in respect of the taxes deducted and deposited into the Government Account. Form 16B will be available for download from the website of Centralized Processing Cell of TDS (CPC-TDS) www.tdscpc.gov.in

TDS on Sale of Property in India, In case of Sale of Property by Non –Residents

Where an NRI is looking to sell any property in India he is required to keep some things in mind to avoid trouble from Income Tax Authorities in India.

1. Buyer is required to deduct tax as per prescribed rate of tax u/s 195 of Income Tax Act, 1961.

The prescribed rate (in case of long term gains) is 20.8% (if sale consideration is less than Rs. 50 lacs), 22.88% (if sale consideration is Rs. 50 Lacs – Rs. 1 Crore) and 23.92% (if sale consideration is more than Rs. 1 Crore).

In case of short term capital gains applicable surcharge and cess will be added on total tax computed as per normal average computed tax.

2. As per sec – 195 of Income Tax Act, 1961, the tax should be deducted on total amount of income chargeable to tax; however, the buyer is required to deduct tds on total sale consideration instead of capital gains. However, the assesse can apply to his jurisdictional A.0 for calculation of capital gains so that buyer will deduct tax at gains only not on full value of

Let’s discuss the issue with a case study:-

Suppose Mr. Bhatia a NRI residing in UK having a property in Delhi, India. Mr. Bhatia purchased that property for Rs. 3 crores in F.Y 2014-15 and now Mr. Bhatia looking to sell that property but due to sluggish property rates in India the current market value of Property is Rs. 3.25 Crores Only. Now, if we take indexed cost of acquisition of property for calculating capital gains then it will be Rs. 3.5 Crores so, Mr. Bhatia is not earning any profit on sale but there is loss of Rs. 0.25 Crores. So, if buyer deducts tax @23.92% on Rs. 3.25 Crores then it will be harsh on Mr. Bhatia.

Now, Mr. Bhatia can apply to his A.0 for getting certificate for no deduction of tax at source.

The above case also applies in case Mr. Bhatia sold this Property and has capital gains but he is looking to invest to claim exemptions under sec – 54 of Income Tax Act, 1961.

3. Apply to ITD via Form electronically along with required documents which are mentioned as below:

a) Copies of last 3 year returns along with ITRV and computation.

b) Copies of Sale Agreement

c) Purchase deed along with mapping of payments with bank statement

d) Provisional computation for current year

e) Proof of being non resident

f) TAN of Buyer

g) Status of Outstanding Demands

h) Any other document, if any required.

Author: CA Sohil Rana can be reached at ca.sohilrana@hotmail.com for queries and suggestions.