Requirements of section 194IA

From 1 June 2013, when a buyer buys immovable property (i.e. a building or part of a building or any land other than agricultural land) costing more than Rs 50 lakhs, he has to deduct tax at source (TDS) when he pays the seller. This has been laid out in Section 194-IA of the Income Tax Act.

• The buyer has to deduct TDS at 1% of the total sale consideration. Here, the buyer is required to deduct TDS, not the seller
• No TDS is required to be deducted if sale consideration is less than Rs 50 lakhs.
• If the payment is made by instalments, then TDS has to be deducted on each instalment paid.
• ‘Consideration for immovable’ property shall include all charges like nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to the transfer of the immovable property. This is applicable for immovable property purchased on or after 1 September 2019 as per Budget 2019.
• TDS is to be paid on the entire sale amount. For example, if you have bought a house at Rs 55lakh, you have to pay TDS on Rs 55 lakh and not on Rs 5 lakh (i.e. Rs 55 lakh – Rs 50 lakh). This is applicable even when there is more than 1 buyer or seller. Post the budget 2019 amendment to section 194-IA, in the above example, if on 1 September 2019, you have paid Rs 2 lakh towards parking fee, Rs 1 lakh for water facility fee and Rs 1 lakh for electricity fee, your sale consideration would be Rs 59 lakh (55+2+1+1). You will have to pay TDS on Rs 59 lakh @ 1%. Your TDS payable would be Rs 59,000. In case the transaction is carried out from 14 May 2020 to 31 March 2021, the rate is 0.75%.
• The buyer of any immovable property need not obtain a TAN (Tax Deduction Account Number) for making payment of the TDS on immovable property. You can make the payment using your PAN.
• For the purpose of making payment of TDS on immovable property, the buyer has to obtain the PAN of the seller, else TDS is deducted at 20%. PAN of the buyer is also mandatory.
• TDS is deducted at the time of payment (including instalment payments) or at the time of giving credit to the seller, whichever is earlier. The TDS on the immovable property has to be paid using Form 26QB within 30 days from the end of the month in which TDS was deducted.
• After depositing TDS to the government, the buyer is required to furnish the TDS certificate in form 16B to the seller. This is available around 10-15 days after depositing the TDS. The buyer is required to obtain Form 16B and issues the form to the seller.

Steps to pay TDS through challan 26QB and to obtain Form 16

The steps to pay TDS through challan 26QB and to obtain Form 16B (for the seller) are as follows:

Step 1: Payment through Challan 26QB (Online and Offline)

• Log on to tin.nsdl.com. Select ‘Services’ from the tab and click on ‘e-payment-Pay taxes online’. A new window with different challans will open as below:

• Click on the proceed button on the tab -TDS on property (Form 26QB) as highlighted above. A new screen will appear as below:

• Select the code 0020 if you are a corporate payer and 0021 if you are a non-corporate payer. Details like Financial year, assessment year, type of payment, will be auto-populated.
• Fill in other necessary details in all other tabs like – resident/non-resident, PAN of the buyer, PAN of the seller, full address of transferee as well as transferor, complete address of the property, the amount paid in figures and words, tax amount to be deposited etc.
• Once you fill in all the necessary details, the last tab is ‘payment info’. There are 2 modes of payment at the bottom of the page: e-tax payment immediately (through net banking facility) and e-tax payment on the subsequent date (e-payment of taxes by visiting any of the Bank branches). Choose the one which you prefer and click on ‘Proceed’.

• If you choose net banking, you will be able to login into your bank and pay online. After you have paid, the bank lets you print Challan 280 with a tick on 800 (i.e. payment of TDS on sale of the property). Print this out and keep it safe.
• If you cannot pay online, an online receipt for Form 26QB with a unique Acknowledgment Number is generated for you. This is valid for 10 days after generation. You can take this to one of the authorized banks along with your cheque. The bank will proceed with the online payment and generate your challan.

Step 2: Register in TRACES

• If you are a first-time user, register on TRACES as a Tax Payer with your PAN Card Number and the Challan number registered during payment.

• Once you register, you will be able to obtain approved Form 16B (TDS certificate) and you can issue this Form to the Seller.
• Check your Form 26AS seven days after payment. You will see that your payment is reflected under “Details of Tax Deducted at Source on Sale of Immovable Property u/s 194(IA) [For Buyer of Property]”.
• Part F gives you details such as TDS certificate number (which TRACES generates), name and PAN of deductee, transaction date and amount, acknowledgement number (which is the same as the one on your Form 26QB), date of deposit and TDS deposited.

Step 3: Download your Form 16B

• After your payment in Form 26AS has been reflected, log in to TRACES. Go to the Download tab at the tab and click on “Form-16B (for the buyer)”.

• To finish this process, fill PAN of the seller and acknowledgement number details pertaining to the property transaction and click on “Proceed”.

• Verify all the details once and click on “Submit a request”.

• After a few hours, your request will be processed. Click on the Downloads tab and select Requested Downloads from the drop-down menu.

• You should be able to see that the status of your Form 16B download request is ‘available‘.
• If the status says ‘submitted‘ wait for a few hours more before repeating the last step.
• Download the ‘.zip file’. The password to open the ‘.zip file’ is the date of birth of the deductor (the format is DDMMYYYY). Your form will be available inside the .zip file as a pdf. Print this out.

Notice for Non-Filing of Form 26QB

The income tax department receives an Annual Information Return (AIR) from the registrar/sub-registrar office regarding the purchase and sale of property regularly. From this report, the department can figure out if you have made a property transaction exceeding Rs.50 lakh.

If the buyer has not deducted tax at source at 1% (or 0.75%) of the transaction amount or not filed TDS within the specified time, the IT department will send a notice to the buyer.

Mandatory Filing of Form 26QB

As per the Finance Act of 2013, TDS is applicable on the transfer of immovable property, wherein the consideration of the property exceeds or is equal to Rs 50 Lakhs.

Section 194 IA of the Income Tax Act, 1961 read with Rule 30, 31 & 31A of Income Tax Rules states that:

• For all such transactions with effect from June 1, 2013, Tax @ 1% should be deducted by the purchaser of the property at the time of making payment of sale consideration.
• Tax so deducted should be deposited to the Government Account through e-tax Payment option (Netbanking) or any of the authorised bank branches.
• Any sum so deducted under section 194-IA shall be required to be paid to the credit of the Central Government within a period of seven days from the end of the month in which the deduction is made.
• PAN of the seller, as well as Purchaser, should be mandatorily furnished in an online form (Form 26QB) for furnishing information regarding the property transaction. Facility for furnishing information regarding the transaction of sale of immovable property and payment of TDS thereof is available on the website www.tin-nsdl.com (http://www.tin-nsdl.com/).
• TDS certificate in Form 16B is required to be issued by the Buyer of property to the Seller, in respect of the taxes deducted and deposited into the Government Account.
• Form 16B will be available for download by registering on the website of Centralized Processing Cell (TDS) www.tdscpc.gov.in (http://www.tdscpc.gov.in/).

Implications of Non-Late Filing of TDS Statement

For Buyer of Property

• In case of default on account of non/late filing of Form 26QB, a fee shall be levied u/s 234E of the Act.
• He shall be liable to pay, by way of fee, a sum of Rs. 200 (two hundred) for every day during which such failure continues.
• The buyer would also be liable for defaults of Late Deduction, Late Payment and Interest thereon. Penalty under Section 271H may also be levied on him by the Assessing Officer.

For Seller of Property

• In case of non/ late filing of Form 26QB, the seller will not be able to claim the TDS Credit.
• Tax so deducted should be deposited to the Government Account through the e-tax payment option (Netbanking) or any of the authorised bank branches. Any sum so deducted under section 194-IA shall be required to be paid to the credit of the Central Government within a period of seven days from the end of the month in which the deduction is made.

Penalties for Non-Filing of Form 26QB