TDS On Real Estate Sales

When paying the seller of an immovable property, the buyer must deduct tax at source if the transaction’s value is Rs. 50 lakhs or higher. Several transactions, including the sale of real estate, are subject to tax deducted at source. As stated in Section 194-IA of the income tax code, TDS on the sale of property is applicable.

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Article 194-IA

A buyer is required to withhold and deposit 1% of the transaction cost as TDS on the sale of property under Section 194-IA of the Income-Tax Act if the property’s worth exceeds Rs 50 lakhs. In the event that there is a discrepancy between the stamp duty value & the actual sale value of the property, Section 194-IA does not indicate which amount should be taken into account for calculating the TDS on property sale.

It is important to note that property cannot be registered below government-set circular rates, which are used to determine how much stamp duty will be charged on the sale. The property’s market value may be greater or less than the amount subject to stamp duty. According to the notification made on February 1, 2022, the buyer will be required to determine TDS on a property transaction based on the valuation that is higher in such a situation.

“The Act’s Section 194-IA allows for the tax to be deducted from payments made when certain moveable properties, other than agricultural land, are transferred. Any person liable for paying to a resident any sum as consideration for the transfer of any immovable property (other than agricultural land) is required to deduct tax at the time of crediting or paying the resident the sum at the rate of 1% of the sum as income-tax thereon, according to sub-section (1) of the aforementioned section. The Memorandum to the Budget 2022 indicates that Sub-section (2) stipulates that no tax deduction shall be provided when the consideration for the transfer of an immovable property is less than Rs. 50 lakhs.


According to Article 194-IA

“TDS shall be deducted from the consideration paid by the Transferee to the Transferor in line with the provisions of the aforesaid section. According to Sections 43CA and 50C of the Act, the stamp duty value of the immovable property is to be taken into account when calculating income under the headings “profits and gains from business or profession” and “capital gains,” respectively. This section, however, does not do so. The provisions of Section 194-IA as well as Sections 43CA and 50C of the Act are therefore inconsistent, it continues.

In order to eliminate inconsistency, it is proposed to amend Section 194-IA of the Act to stipulate that TDS is to be withheld at a rate of 1% of any sum paid or credited to the resident or the stamp duty value of such property, whichever is higher, in the case of the transfer of an immovable property (other than agricultural land).

No tax is to be deducted under section 194-IA if the consideration paid for the transfer of immovable property as well as the stamp duty value of such property are both less than Rs 50 lakhs.


Who collects TDS and what is it?

The Indian government passed a rule requiring the buyer of a property to withhold tax at source when paying the seller of the property in order to curb the widespread usage of undeclared funds in immovable property transactions. To collect taxes directly from the source of income, the idea of TDS, or tax deducted at source, was created.

The law requires that anyone (the deductor) who is obligated to pay money of a certain kind to another person (the deductee) deduct tax at source & remit it to the government. This basically implies that in property purchases, it would be the buyer’s responsibility to deduct the TDS. On the basis of Form 26AS or a TDS certificate provided by the buyer. The seller whose income the tax has been deducted at source is entitled to get credit for the amount so deducted.


Property types covered

“Any person, being a transferee, shall deduct an amount equal to 1% of such sum as income tax thereon at the time of crediting such sum to the account of the transferor or at the time of payment of such sum in cash, by issuing of a cheque or draught, or by any other mode, whichever is earlier, for the transfer of any immovable property” (other than agricultural land”). If the transaction’s worth is Rs 50 lakhs or above. This provision compels the buyer to deduct tax at the amount of 1% of the sale consideration. Land, commercial property, and residential property are all covered in this section. However, this clause does not apply to transactions involving the purchase of agricultural land.

Additionally, since the government deducts capital gains tax on NRIs in addition to TDS, the treatment of assets sold by an NRI would differ in TDS matters. The rate of TDS is hence substantially higher in these circumstances.


When and how should TDS be deducted?

The buyer of the property must deduct the TDS either at the time the conveyance deed is executed. If an advance is being paid before the conveyance deed, at the time the advance is paid. Within 30 days at the end of the month in which the tax is so deducted. The buyer must deposit the TDS amount to the credit of the central government. You must complete Form-cum-challan No. 26QB in order to provide further information and pay the TDS. If there are many buyers or sellers for a property. A separate Form 26QB must be filled out for each group of buyers and sellers. Each Form 26QB must include all buyers’ and sellers’ information.


Rental TDS

Renters who are individuals or HUFs are likewise required to withhold tax at the source. The same is true for people and HUFs who are the subject of a tax audit. For the fiscal years 2020–21, the limit for deducting TDS from rent is Rs 2.40 lakhs. This cap was maintained at Rs. 1.80 lakhs through FY 2019.


Information needed to pay the TDS

The obligation to deduct TDS and pay the resulting sum to the federal government is on the buyer. The following URL provides detailed instructions for completing the form and paying the tax:

Generally speaking, a TAN is required for everyone who is in charge of deducting TDS (tax deduction account number). However, the buyer is not required to obtain the TAN in cases of TDS on immovable property. In Form 26QB, you must include information about both the seller and the buyer, including their names, addresses, PANs, phone numbers, and email addresses. Along with the date of the agreement, the total amount of consideration, the date of payment, etc., you must also include the full address of the property.

The buyer should confirm that the seller’s PAN is accurate. If the seller does not provide the PAN card information requested in Form 26QB, they will not be able to receive the credit for tax withheld by the buyer.

When presenting the physical challan to an authorized bank, the TDS can be paid online or deposited offline. The information on the income tax department’s website will thereafter be updated by the bank. The buyer must obtain the TDS certificate in Form No. 16B from the Income Tax Department’s website and give it to the seller within 15 days of the TDS being lodged.


TDS is deducted less or not at all.

For the payer to deduct tax at a lesser rate or nil rate or. In some situations, only a declaration for nil TDS. Some TDS laws call for the payee to either approach the income tax officer for the issuance of a certificate. On immovable property, there isn’t any such provision for TDS, nevertheless. Where the consideration exceeds Rs. 50 lakhs, the buyer is required to automatically deduct tax at source from each pair of buyer and seller.


What day is the TDS deposit due to the government?

The buyer must deposit the TDS (tax deducted at source) with the government by the seventh day of the next month after it has been deducted. This means that by April 7, the government must receive payment of the TDS deducted in the month of March.


Consequences of not making TDS payments

The buyer is required by law to take the applicable TDS out of the transaction value and properly submit it to the government. Since a TAN is not required in their situation, buyers are free to utilize their PAN information in the forms. Buyers who fail to pay the TDS to the government within the allotted time frame may be subject to interest charges or a harsh prison term of up to seven years. Please keep in mind that even if the seller might be required to pay. The person who would actually be penalized is the buyer.


TDS: Things to keep in mind as a buyer

  • Depending on when the money is paid, deduct either 1% or 0.75 percent TDS from the sale price.
  • Obtain the seller’s PAN and cross-check it against the genuine PAN card.
  • TDS must also be paid using your PAN.
  • There is no online process for correcting inaccuracies. So be careful when quoting the PAN or other details in the online form.
  • You must speak with the Income Tax Department for the purpose of correction.


TDS: Things to keep in mind for sellers

  • Provide the buyer with your PAN.
  • Check your Form 26AS Annual Tax Statement to see if the buyer deducted any taxes from the deposit.


Things to keep in mind regarding TDS

  • On real estate valued at more than Rs 50 lakhs, buyers must deduct and pay TDS to the government.
  • The buyers, not the supplier, are accountable for withholding and submitting the TDS.
  • The buyer will be held responsible for any misappropriation in this regard and will face legal consequences. To credit the TDS, buyers must fill out Form 26QB.
  • Separate papers must be filled out for each buyer or seller if there are many parties engaged in the transaction.


Budget 2022: TDS on real estate sales to be levied on the greater of the stamp duty value or sale amount.

According to a statement made by finance minister Nirmala Sitharaman in the Budget 2022. Home buyers must deduct 1% TDS on property purchases based on either the stamp duty value or the real price, whichever is higher. The new regulation becomes operative on April 1st, 2022.





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