What is the TDS rate for property transactions?

TDS on property transactions is deducted at a rate of 1% of the total sale consideration or stamp duty value, whichever is higher. This rate applies to all property transactions exceeding ₹50 lakh under Section 194-IA of the Income Tax Act.

Can TDS be deducted without PAN of the seller?

Yes, TDS can still be deducted without the PAN of the seller. However, the TDS will be deducted at a higher rate of 20% instead of the standard 1%. Moreover, the seller will not be able to claim the TDS credit against their tax liability unless they provide their PAN.

Is TDS applicable on agricultural land transactions?

No, TDS is not applicable to agricultural land transactions under Section 194-IA. Agricultural land is exempt from TDS provisions, even if the sale consideration exceeds ₹50 lakh.

How should TDS be mentioned in the sale deed?

The sale deed should include a clause that explicitly states the buyer's responsibility to deduct and deposit TDS under Section 194-IA. It should also mention the amount of TDS, the date of deposit, and the seller's PAN for clear documentation of the transaction.

Is TAN required for TDS payment on property transactions?

No, a TAN (Tax Deduction and Collection Account Number) is not required for TDS payments on property transactions under Section 194-IA. Only the PAN of the buyer and the seller is sufficient for TDS filing and payment.

What happens if the seller does not provide a PAN?

If the seller does not provide a PAN, TDS will be deducted at a higher rate of 20% instead of 1%. Additionally, the seller will not be able to claim the TDS credit, which could affect their future tax filings.

What is Form 26QB and how is it used?

Form 26QB is an online challan-cum-statement that must be filled out by the buyer when making TDS payments on property transactions. It includes details such as the PAN of both the buyer and seller, the transaction value, and the TDS amount deducted. This form is submitted to the Income Tax Department to make the TDS payment.

How can the buyer obtain Form 16B for the seller?

After depositing the TDS via Form 26QB, the buyer must generate and issue Form 16B to the seller within 15 days. Form 16B serves as proof that the TDS has been deducted and deposited with the government. The buyer can obtain Form 16B by logging into the Income Tax portal.

Is there any exemption for TDS on property transactions?

Yes, if the property transaction involves agricultural land, it is exempt from TDS under Section 194-IA. Additionally, if the transaction value is below ₹50 lakh, TDS is not required to be deducted.

What are the penalties for non-compliance with TDS on property transactions?

If TDS is not deducted or deposited on time, the buyer may be liable for penalties and interest charges. Failure to issue Form 16B to the seller can also result in penalties, and the buyer may face difficulties in claiming expenses related to TDS deduction.

What is the threshold for TDS deduction on property transactions?

TDS is applicable to property transactions where the sale consideration exceeds ₹50 lakh. For transactions below this amount, TDS is not required under Section 194-IA.

How is TDS applied if there are multiple sellers or buyers?

If there are multiple sellers or buyers involved in a property transaction, separate Form 26QB filings must be submitted for each buyer-seller combination. The TDS amount should be divided proportionally among the sellers if multiple sellers are involved.

Documents Required to File TDS on Property Transactions: TDS Compliance Checklist

Nimisha Panda
Apr 29
7 min read

Updated: May 2

Documents Required to File TDS on Property Transactions: TDS Compliance Checklist

Filing TDS on property transactions is a crucial step in ensuring compliance with the Income Tax Act, particularly under Section 194-IA. For both buyers and sellers, it is essential to understand the documentation requirements and procedural steps involved in TDS filing. This tax deduction is applicable to property transactions where the sale consideration exceeds ₹50 lakh, and the buyer is responsible for deducting and depositing TDS at a rate of 1%. However, proper documentation and adherence to timelines are necessary to avoid penalties and ensure a smooth filing process.

What Documents are Required to File TDS on Property Transactions?

List of Documents for TDS Filing

Detailed Compliance Process

Addressing Specific Long-Tail Questions

Conclusion

FAQs

What Documents are Required to File TDS on Property Transactions?

To file TDS on property transactions, several key documents are required. These include the PAN cards of both the buyer and seller, as TDS cannot be deducted without them; the registered sale agreement or sale deed, which specifies transaction details and TDS clauses; a stamp duty valuation certificate or receipt, to determine the correct TDS amount based on the higher of the sale consideration or stamp duty value; Form 26QB, the TDS payment challan that must be submitted online; an acknowledgment receipt of TDS payment; Form 16B, the TDS certificate that the buyer must issue to the seller; Aadhaar-PAN linking proof for transactions in FY 2025-26 onwards; and the buyer’s bank account details for payment processing. Each of these documents is crucial for ensuring compliance with the tax rules under Section 194-IA of the Income Tax Act.

List of Documents for TDS Filing

When filing TDS on property transactions under Section 194-IA, several crucial documents must be submitted to ensure compliance with tax regulations.

PAN Card of Buyer and Seller The PAN cards of both the buyer and seller are essential for TDS filing. PAN is mandatory for all tax-related transactions in India. If the seller does not have a PAN, TDS will be deducted at a higher rate of 20%, and the seller will not be able to claim the TDS credit against their tax liability.
Sale Agreement or Sale Deed The sale deed or sale agreement is a critical document that outlines the transaction's details, including the agreed sale price, the parties involved, and any clauses related to TDS deduction. This document serves as a legal record and must specify that the buyer is responsible for deducting and depositing the TDS amount, along with providing a copy of Form 16B to the seller as proof.
Stamp Duty Valuation Certificate or Receipt Since TDS is deducted based on the higher of the sale consideration or the stamp duty value, a stamp duty valuation certificate or receipt from the local authority is required. This document ensures that the TDS is calculated accurately according to the market value determined by the authorities.
Form 26QB (TDS Payment Challan) Form 26QB is an online challan-cum-statement that the buyer must fill out to pay the TDS. The form includes details like the PAN of both the buyer and seller, the transaction value, the TDS amount, and the property details. It must be submitted online to initiate the TDS payment.
Acknowledgment Receipt of TDS Payment Once TDS is paid via Form 26QB, an acknowledgment receipt is generated by the Income Tax Department. This receipt serves as proof that the TDS has been deposited with the government. The acknowledgment is an important document to maintain for future reference and compliance.
Form 16B (TDS Certificate) After the TDS payment, the buyer is required to generate and issue Form 16B to the seller within 15 days. This form acts as a TDS certificate and confirms that the TDS has been deducted and deposited. It provides the seller with the necessary details to claim TDS credit in their income tax return.
Aadhaar-PAN Linking Proof (For FY 2025-26 Onwards) As per updated regulations from FY 2025-26, TDS can only be deducted if both the buyer's and seller's PAN are linked to Aadhaar. Proof of this linkage may be required to verify that the parties involved are compliant with the latest tax filing rules.
Bank Account Details of Buyer The buyer's bank account details are necessary to facilitate the online payment of TDS and the filing of Form 26QB. These details ensure that the payment is processed electronically and accurately.

Detailed Compliance Process

Threshold Limit TDS is applicable only if the property transaction value exceeds ₹50 lakh. For transactions below this threshold, TDS is not required under Section 194-IA.
TDS Rate The rate of TDS deduction is 1% of the sale consideration or the stamp duty value, whichever is higher. This is the standard rate under Section 194-IA, ensuring that the government receives its due share from property transactions.
Deduction Timing TDS must be deducted at the time the payment is made or credit is given to the seller, whichever occurs first. This ensures that the TDS is deducted promptly and in compliance with the tax rules.
Deposit Timeline After the TDS is deducted, the buyer must deposit the amount with the government online within 30 days from the end of the month in which the deduction was made. Failure to comply with this timeline can result in penalties.
Multiple Sellers/Buyers If there are multiple sellers or buyers in the transaction, a separate Form 26QB must be filed for each buyer-seller combination. Additionally, the TDS deducted must be split proportionally among the sellers.
Penalty for Non-Compliance Penalties for non-compliance, such as failing to deduct or deposit TDS on time or failing to issue Form 16B to the seller, can result in interest and additional fines. These penalties are intended to encourage timely compliance with the TDS rules.

Addressing Specific Long-Tail Questions

Can TDS be deducted without PAN of seller? Yes, TDS can still be deducted without the PAN of the seller, but at a higher rate of 20% instead of the regular 1%. The seller will not be able to claim the TDS credit unless PAN is provided.
Is TDS applicable on agricultural land? No, agricultural land transactions are exempt from TDS under Section 194-IA. This exemption applies to both rural and urban agricultural land.
How to mention TDS in the sale deed? The sale deed should include a clear clause stating the buyer's obligation to deduct and deposit TDS under Section 194-IA. It should specify the amount to be deducted, the date of deposit, and the seller's PAN details.
Is TAN required for TDS payment on property? No, a TAN (Tax Deduction and Collection Account Number) is not required for TDS payment on property transactions. Only the PAN of the buyer and seller is necessary.
What if the buyer or seller is an NRI? In case the buyer or seller is a Non-Resident Indian (NRI), different TDS provisions apply, typically under Section 195 or 27Q. Form 27Q is used instead of Form 26QB for such transactions, and the TDS rates may differ.

Conclusion

Filing TDS on property transactions requires a thorough understanding of the documentation and compliance processes. By ensuring that all necessary documents are collected and the correct procedures followed, buyers can avoid penalties and ensure a smooth transaction. Compliance with Section 194-IA is crucial to ensure that the TDS filing is done correctly and on time, providing both buyers and sellers with the assurance that their tax obligations are met.

FAQs

What is the TDS rate for property transactions?
TDS on property transactions is deducted at a rate of 1% of the total sale consideration or stamp duty value, whichever is higher. This rate applies to all property transactions exceeding ₹50 lakh under Section 194-IA of the Income Tax Act.
Can TDS be deducted without PAN of the seller?
Yes, TDS can still be deducted without the PAN of the seller. However, the TDS will be deducted at a higher rate of 20% instead of the standard 1%. Moreover, the seller will not be able to claim the TDS credit against their tax liability unless they provide their PAN.
Is TDS applicable on agricultural land transactions?
No, TDS is not applicable to agricultural land transactions under Section 194-IA. Agricultural land is exempt from TDS provisions, even if the sale consideration exceeds ₹50 lakh.
How should TDS be mentioned in the sale deed?
The sale deed should include a clause that explicitly states the buyer's responsibility to deduct and deposit TDS under Section 194-IA. It should also mention the amount of TDS, the date of deposit, and the seller's PAN for clear documentation of the transaction.
Is TAN required for TDS payment on property transactions?
No, a TAN (Tax Deduction and Collection Account Number) is not required for TDS payments on property transactions under Section 194-IA. Only the PAN of the buyer and the seller is sufficient for TDS filing and payment.
What happens if the seller does not provide a PAN?
If the seller does not provide a PAN, TDS will be deducted at a higher rate of 20% instead of 1%. Additionally, the seller will not be able to claim the TDS credit, which could affect their future tax filings.
What is Form 26QB and how is it used?
Form 26QB is an online challan-cum-statement that must be filled out by the buyer when making TDS payments on property transactions. It includes details such as the PAN of both the buyer and seller, the transaction value, and the TDS amount deducted. This form is submitted to the Income Tax Department to make the TDS payment.
How can the buyer obtain Form 16B for the seller?
After depositing the TDS via Form 26QB, the buyer must generate and issue Form 16B to the seller within 15 days. Form 16B serves as proof that the TDS has been deducted and deposited with the government. The buyer can obtain Form 16B by logging into the Income Tax portal.
Is there any exemption for TDS on property transactions?
Yes, if the property transaction involves agricultural land, it is exempt from TDS under Section 194-IA. Additionally, if the transaction value is below ₹50 lakh, TDS is not required to be deducted.
What are the penalties for non-compliance with TDS on property transactions?
If TDS is not deducted or deposited on time, the buyer may be liable for penalties and interest charges. Failure to issue Form 16B to the seller can also result in penalties, and the buyer may face difficulties in claiming expenses related to TDS deduction.
What is the threshold for TDS deduction on property transactions?
TDS is applicable to property transactions where the sale consideration exceeds ₹50 lakh. For transactions below this amount, TDS is not required under Section 194-IA.
How is TDS applied if there are multiple sellers or buyers?
If there are multiple sellers or buyers involved in a property transaction, separate Form 26QB filings must be submitted for each buyer-seller combination. The TDS amount should be divided proportionally among the sellers if multiple sellers are involved.