Reporting Property Sale TDS in ITR: Buyer and Seller Guidelines
- PRITI SIRDESHMUKH
- 3 hours ago
- 10 min read
TDS on property sale under Section 194-IA ensures that tax is collected at the source during the sale of immovable property valued above ₹50 lakh. The buyer is responsible for deducting 1% TDS on the higher of the sale price or stamp duty value and depositing it with the government through Form 26QB. The seller, on the other hand, must ensure this TDS is reflected in Form 26AS to claim credit while filing the Income Tax Return. Understanding these obligations prevents mismatches, penalties, and delays in claiming refunds or completing property registration.
Table of Contents
Understanding Section 194-IA of the Income Tax Act
Section 194-IA of the Income Tax Act, 1961 governs the deduction of tax at source (TDS) on the sale of immovable property other than agricultural land. It applies when the sale consideration or the stamp duty value of the property exceeds ₹50 lakh. In such cases, the buyer must deduct 1% TDS on the higher of the two values before making payment to the seller. This ensures that the government receives tax revenue at the time of property transfer. However, agricultural land is excluded from this provision, and transactions below ₹50 lakh are exempt. This TDS must be deposited using Form 26QB within 30 days from the end of the month in which the deduction is made.
Buyer’s Responsibility in Property Sale TDS Compliance
The buyer carries the primary responsibility for TDS compliance during property purchase. The key steps include deducting 1% TDS on the total sale consideration or stamp duty value, whichever is higher, before releasing payment to the seller. The buyer must obtain the seller’s PAN and mention it accurately in Form 26QB to avoid a higher deduction rate of 20%. Once deducted, the TDS must be deposited with the government within 30 days, after which the buyer is required to issue Form 16B (TDS certificate) to the seller within 15 days of deposit. In cases involving multiple buyers or sellers, separate Form 26QB filings are mandatory for each combination.
Step-by-Step Process for Filing Form 26QB Online
Visit the official TIN or NSDL portal and select the option “TDS on Sale of Property (Form 26QB).”
Enter buyer and seller details, including PAN, address, and property information.
Specify the total consideration and TDS amount calculated at 1%.
Choose the payment mode—either net banking or e-payment through a bank branch.
Submit the form and save the acknowledgement number for future reference.
After successful payment, log in to the TRACES portal to download Form 16B, the TDS certificate that must be provided to the seller. This streamlined process ensures the TDS is deposited correctly and recorded under the buyer’s and seller’s PANs.
Seller’s Role in Reporting Property Sale TDS in ITR
The seller must verify that the TDS deducted by the buyer reflects correctly in Form 26AS or the Annual Information Statement (AIS). While filing the Income Tax Return, the seller should report this TDS under the “Tax Details” section, including the TAN of the buyer and the TDS amount. If the property sale results in capital gains, the seller must use ITR-2 to declare the transaction and corresponding TDS. Accurate reporting allows the seller to claim credit for the tax deducted and ensures smooth processing of refunds if the TDS exceeds the total tax liability.
Reporting TDS Under Section 194-IA in the Income Tax Return
During ITR filing, sellers must navigate to the “TDS from Property” section and input the details as reflected in Form 26AS. The TDS should match the information available under the buyer’s TAN to avoid mismatches. Once verified, it is automatically adjusted against the seller’s total tax liability. If discrepancies are found—such as missing entries or incorrect PAN details—corrections can be initiated through the buyer by revising Form 26QB. This accurate reporting process ensures that the seller receives proper credit and minimises the chances of processing delays or notices from the Income Tax Department.
Common Errors in Property TDS Reporting and How to Avoid Them
Common mistakes often occur during TDS deduction and reporting. These include entering incorrect PAN details of the buyer or seller, using the wrong assessment year, or depositing TDS under an incorrect section. Failure to issue Form 16B or delayed deposits also lead to penalties and disallowance of TDS credit. Another frequent issue is double reporting in Form 26AS or mismatches between the TDS and sale consideration. To avoid these errors, taxpayers must verify details carefully, cross-check Form 26QB before submission, and maintain acknowledgment receipts and certificates for future reference.
TDS Deduction for Non-Resident Sellers Under Section 195
When the property seller is a non-resident Indian (NRI), TDS is governed by Section 195 instead of Section 194-IA. The deduction rate for NRIs can be significantly higher, as it is based on the type of capital gain—short-term or long-term—and may range from 20% to 30% (plus applicable surcharge and cess). The buyer must also consider any relief under the Double Taxation Avoidance Agreement (DTAA) provisions. In such cases, the buyer needs to obtain Form 15CA and 15CB from a Chartered Accountant before making the payment. Compliance for NRI transactions is more complex and requires professional assistance to avoid penalties or excess deductions.
Penalties and Interest for Non-Compliance in Property TDS
Failure to deduct or deposit TDS in time can attract severe consequences. Under Section 201, the buyer may be treated as an assessee-in-default, liable to pay the deducted amount along with interest. The penalty for late filing of Form 26QB is ₹200 per day until the return is filed, up to the total TDS amount. Additionally, interest is charged at 1% per month for late deduction and 1.5% per month for late deposit. Persistent non-compliance can also delay property registration or trigger scrutiny from the Income Tax Department.
How to Claim Property Sale TDS Credit While Filing ITR
To claim TDS credit, the seller must confirm that the deduction is visible in Form 26AS and the Annual Information Statement. During ITR filing, this TDS is adjusted against the total tax payable, and any excess amount becomes refundable. Sellers should ensure that the buyer’s details, TAN, and TDS amounts match perfectly. If the deducted amount exceeds the actual tax liability, the refund can be claimed while submitting the ITR. Using an expert-assisted platform such as TaxBuddy ensures that all entries are accurately mapped, preventing delays or mismatches during the assessment process.
Role of TaxBuddy in Simplifying Property Sale TDS Compliance
TaxBuddy simplifies the entire TDS compliance process for property transactions by assisting both buyers and sellers. The platform ensures correct TDS deduction, timely deposit through Form 26QB, and seamless reflection in Form 26AS. For sellers, TaxBuddy helps verify TDS credits, report them accurately in ITR, and claim refunds efficiently. With AI-driven systems and professional support, users can minimise errors, avoid penalties, and experience a smoother tax filing journey. It serves as a reliable partner for those dealing with property transactions and ensures compliance under Sections 194-IA and 195 with minimal effort.
Conclusion
Accurate deduction and reporting of TDS on property sales are essential for both buyers and sellers. Section 194-IA ensures tax transparency in high-value real estate transactions, while proper compliance prevents penalties and credit mismatches. Buyers must deduct and deposit TDS timely, and sellers should verify and report it correctly in their ITRs to claim benefits smoothly. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy provides flexibility for every type of taxpayer through both self-filing and expert-assisted plans. The self-filing plan is ideal for individuals comfortable managing their own returns, as it includes smart AI-based suggestions and automated validation to minimize errors. The expert-assisted plan, on the other hand, connects users directly with certified tax professionals who handle everything from TDS verification to ITR filing, ensuring complete accuracy and compliance. This dual approach helps taxpayers choose the option best suited to their needs and comfort level.
Q2. Which is the best site to file ITR?
The best site to file ITR depends on the level of convenience and support a taxpayer is seeking. While the government’s official e-filing portal serves as the primary channel for return submission, platforms like TaxBuddy simplify the process significantly. TaxBuddy’s interface uses automation and real-time data validation to eliminate common filing errors, and its expert assistance ensures correct reporting of TDS, capital gains, and deductions. Users benefit from a smoother, faster, and more accurate filing experience compared to manual or unassisted methods.
Q3. Where to file an income tax return?
Income tax returns can be filed through the Income Tax Department’s official portal (www.incometax.gov.in) or via authorized third-party platforms like TaxBuddy. The official portal is suitable for those who prefer direct filing and are familiar with tax forms, while TaxBuddy offers a guided, automated process. On TaxBuddy, users can upload documents such as Form 16, TDS certificates, and AIS data to generate pre-filled returns with expert validation, reducing the chances of errors and ensuring timely filing with all due compliances met.
Q4. What is the TDS rate on property sale under Section 194-IA?
Under Section 194-IA of the Income Tax Act, buyers must deduct 1% TDS on the higher of the property’s sale consideration or the stamp duty value if the transaction value exceeds ₹50 lakh. This TDS must be deducted at the time of payment to the seller, regardless of whether the amount is paid in instalments or as a lump sum. If the seller does not provide a valid PAN, the TDS rate increases to 20%. The deduction ensures advance tax collection and helps the seller claim proper credit while filing the ITR.
Q5. How can a buyer deposit TDS deducted on property purchase?
Once TDS is deducted, the buyer must deposit it using Form 26QB—a challan-cum-statement available on the official TIN or NSDL portal. The deposit should be made within 30 days from the end of the month in which the deduction occurs. Payment can be done online via net banking or through an authorized bank branch. After depositing, the buyer should download Form 16B from the TRACES portal and provide it to the seller as proof of TDS deduction. Timely compliance avoids penalties and ensures transparency in the transaction.
Q6. What happens if the buyer fails to deduct or deposit TDS on time?
Failure to deduct or deposit TDS within the prescribed time can lead to multiple consequences under the Income Tax Act. The buyer may be treated as an “assessee-in-default” and held liable to pay the deducted amount along with interest. Interest at 1% per month is charged for late deduction and 1.5% per month for late deposit. Additionally, a penalty of ₹200 per day is levied until Form 26QB is filed, up to the total TDS amount. Such non-compliance may also delay property registration or trigger departmental scrutiny.
Q7. Can the seller claim a refund if excess TDS is deducted?
Yes, the seller can claim a refund for excess TDS during ITR filing. The seller must ensure that the deduction appears correctly in Form 26AS under the buyer’s TAN. If the total TDS deducted exceeds the seller’s actual tax liability, the difference will be refunded upon return processing. This refund is credited directly to the seller’s pre-validated bank account registered on the e-filing portal. It is important that the seller reviews all TDS details for accuracy before submitting the return to prevent delays or mismatches.
Q8. Which ITR form should be used for reporting capital gains and TDS?
Individuals selling property and earning capital gains are generally required to file ITR-2. This form is suitable for those who do not have business income but report income from capital gains, property, or other sources. Within ITR-2, the seller must enter property details, sale consideration, acquisition cost, and applicable deductions under Sections 54, 54EC, or 54F if reinvestment is made. The TDS deducted under Section 194-IA should also be reported in the “Tax Details” section, ensuring proper credit against total tax liability.
Q9. What is Form 26QB, and why is it important?
Form 26QB is a combined challan and statement used by the buyer to deposit TDS deducted on the purchase of property. It serves as official proof that the tax has been remitted to the government. The form includes details of the buyer, seller, property, sale value, and TDS amount. Once filed, it generates an acknowledgement number, which must be retained for future reference. The buyer can then issue Form 16B (TDS certificate) to the seller. Filing Form 26QB accurately ensures proper credit flow and compliance with Section 194-IA.
Q10. Is agricultural land subject to TDS under Section 194-IA?
No, the sale of agricultural land is specifically excluded from the provisions of Section 194-IA. However, this exemption applies only if the land meets the definition of agricultural land under the Income Tax Act—typicall,y land located beyond specified limits of a municipality or cantonment board. If the land is urban and classified for residential or commercial development, TDS may still apply. Buyers should verify the land’s classification in revenue records to confirm whether the transaction qualifies for this exemption.
Q11. What are the differences in TDS compliance for NRI sellers?
When the property seller is a non-resident Indian (NRI), TDS deduction falls under Section 195 instead of 194-IA. The rate of deduction varies based on the nature of capital gains—20% for long-term and up to 30% for short-term gains, plus surcharge and cess. The buyer must obtain a certificate from a Chartered Accountant in Form 15CB and file Form 15CA before remitting payment. The seller may also apply for a lower deduction certificate under Section 197 to reduce upfront tax liability. NRI transactions demand stricter compliance and professional guidance.
Q12. How does TaxBuddy assist with property TDS compliance?
TaxBuddy offers comprehensive support for both buyers and sellers in managing property-related TDS. The platform ensures correct calculation and deposit of TDS through automated checks for Section 194-IA and 195 applicability. It also assists sellers in verifying TDS credits in Form 26AS, reporting them accurately in ITR, and claiming refunds when due. With its AI-driven system and team of tax experts, TaxBuddy minimises manual errors, prevents compliance lapses, and ensures a smooth filing experience. The mobile app further simplifies document uploads, tracking, and refund monitoring for complete peace of mind.
