In the realm of property transactions within India, a vital directive mandates that a purchaser must enact Tax Deducted at Source (TDS) when acquiring an immovable property exceeding the monetary threshold of Rs. 50 Lakhs. The scope of “immovable property” encompasses structures, segments of structures, and any land excluding agricultural land. This obligation is rooted in Section 194-IA of the Income Tax Act, effective from the 1st of June, 2013, and demands a comprehensive understanding before engaging in any financial dealings with the seller.
To ensure meticulous adherence to TDS on Property Sale, it is imperative to absorb the following essential facets:
– The buyer is required to deduct 1% of the total sale amount as TDS.
– TDS deduction is triggered when the aggregate sale value equals or surpasses Rs. 50 lakh.
– For transactions conducted in installments, TDS is applicable to each installment.
– Ancillary costs linked to immovable property, such as club membership fees, parking charges, and maintenance dues, factor into the TDS calculation.
– This regulation applies to properties acquired on or after the 1st of September, 2019.
– The obligation extends to the entire sale sum, even if multiple buyers or sellers are involved.
– Taxpayer Account Number (TAN) is not a prerequisite; the Permanent Account Number (PAN) suffices for payment.
– Availability of the seller’s PAN is imperative; otherwise, Tax Deducted at Source stands at 20%.
– TDS is to be deducted during the payment process, including staggered payments.
– Subsequent to deduction, Form 26QB must be employed for TDS payment within 30 days.
– Form 16B, denoting TDS deposit, should be furnished to the seller within 10-15 days after deduction.
Filing Form 26QB is obligatory for adherence
- The edict that came into force on the 1st of June, 2013, dictates that purchasers of property are obligated to withhold 1% tax from the sale consideration in relevant transactions.
- This withheld tax must be remitted to the Government Account through electronic tax payment (Netbanking) or authorized bank branches.
- The tax levied under Section 194-IA must be transferred to the Central Government within seven days from the conclusion of the deduction month.
- Crucially, both the seller’s and buyer’s PAN numbers must be incorporated in the online Form 26QB, which serves as a pivotal vessel for transmitting property transaction particulars.
- A crucial portal, accessible via www.tin-nsdl.com (http://www.tin-nsdl.com/), facilitates the exchange of information concerning immovable property sales and TDS disbursements.
- The buyer is tasked with providing the seller with Form 16B, an official document affirming the tax deduction and its remittance to the Government Account.
- To secure Form 16B, individuals can register on the Centralized Processing Cell (TDS) website or seek guidance from our professional team.
Implications of Non/Late Filing of TDS Statements for Property Buyers and Sellers:
For Property Buyers:
– Neglecting Form 26QB punctuality attracts penalties as per Section 234E of the Act.
– A daily fine of Rs. 200 is imposed for each day of non-adherence or delay.
– Late deduction, payment, and interest could subject the buyer to additional penalties, as the Assessing Officer has the authority to levy penalties under Section 271H.
For Property Sellers:
– Failure to promptly file Form 26QB by the seller precludes the possibility of claiming TDS credit.
– Timely remittance of the deducted tax to the Government Account, facilitated through electronic tax payment or authorized bank branches, within seven days from the deduction month’s conclusion (as per section 194-IA) is obligatory.
Consequences for Failing to Fulfill TDS Obligations:
– In the event of failure to deduct TDS, a penalty of 1% per month is levied, computed from the due date of TDS deduction until the actual deduction date.
– For not remitting TDS to the government, a penalty of 1.5% per month is enforced, calculated from the TDS deduction date to the government payment date.
Let’s consider a practical example to understand how TDS deduction works for a property sale in India-
Mr. Sharma is buying an apartment from Mrs. Kapoor. The total cost of the apartment is Rs. 60 Lakhs. The property includes a club membership fee of Rs. 2 Lakhs, a parking fee of Rs. 1 Lakh, and a maintenance fee of Rs. 1 Lakh.
TDS Calculation:
1. Total Property Cost: Rs. 60,00,000
2. Club Membership Fee: Rs. 2,00,000
3. Parking Fee: Rs. 1,00,000
4. Maintenance Fee: Rs. 1,00,000
5. Total Consideration Amount: Rs. 64,00,000 (60,00,000 + 2,00,000 + 1,00,000 + 1,00,000)
Since the total consideration amount exceeds Rs. 50 Lakhs, Mr. Sharma is required to deduct TDS on the entire amount.
TDS Deduction:
TDS Rate: 1%
TDS Amount: 1% of Rs. 64,00,000 = Rs. 64,000
TDS Process:
1. Mr. Sharma needs Mrs. Kapoor’s PAN for the TDS deduction process. If not provided, TDS will be deducted at a higher rate of 20%.
2. Mr. Sharma fills out Form 26QB on the income tax portal. He enters his PAN, Mrs. Kapoor’s PAN, property details, payment details, and the TDS amount of Rs. 64,000.
3. Mr. Sharma makes the TDS payment online through net banking. He receives a Challan Identification Number (CIN) as an acknowledgment of the payment.
4. After payment, Mr. Sharma requests Form 16B on the TRACES portal. He enters the transaction details and the CIN.
5. Once the details are verified, Mr. Sharma downloads Form 16B, which serves as proof of TDS deposit. He gives a copy of the Form 26QB acknowledgment and Form 16B to Mrs. Kapoor.
6. Mr. Sharma includes the TDS details in his Income Tax Return (ITR) when filing taxes.
7. Mrs. Kapoor includes the TDS details from Form 16B in her ITR as well. This allows her to claim credit for the TDS deducted by Mr. Sharma.
Implications of Non/Late Filing:
If Mr. Sharma fails to file Form 26QB on time, he will be liable to pay a late filing fee of Rs. 200 per day until the form is submitted. Additionally, if he doesn’t deposit the TDS with the government within the specified time frame, he will be subject to a penalty of 1.5% per month on the TDS amount.
Conclusion:
In this example, Mr. Sharma successfully deducts TDS on the entire consideration amount of Rs. 64 Lakhs and follows the TDS process diligently. This ensures compliance with the Income Tax Act and maintains transparency in the property transaction. It’s crucial for both buyers and sellers to understand and adhere to the TDS guidelines to avoid penalties and ensure a smooth property sale process.
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