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Form 26QB- A Guide to TDS on Purchase of Immovable Property
If you purchase or sell immovable property in India, you must follow the provisions of the Income Tax Act, of 1961. These transactions come under Section 194-IA, whereby the buyer of the property is required to deduct TDS from the price payable to the property seller. It applies for transaction value exceeding Rs. 50 lakhs. The deductor (buyer) has to issue Form-16B to the deductee (seller). The requirements for Form-26QB are listed under Section 194-IA. In this guide, we will explain the key facts regarding Form 26QB.
What is Form 26QB?
Any person or HUF buying a property worth at least Rs. 50 lakhs must deduct TDS from the consideration payable to the seller. According to section 194IA of the IT Act, TDS is applicable to these transactions. The property in this context refers to every immovable property, such as:
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House property
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Plot or unconstructed land
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Commercial property
The clause does not apply to agricultural land. After deducting the TDS, the seller has to pay it to the government by filing Form 26QB. This has to be done before 30 days from the month’s end when the TDS deduction was initiated. For instance, the TDS amount must reach the government by July 31st, 2020 for a transaction initiated on June 15th, 2020. However, this TDS deduction is applicable only on properties purchased after June 1st, 2013. Filing TDS is not required if formalities involving the property were closed before the date.
How Deducted TDS should be deposited to the Government in Form 26QB?
The buyer of an immovable property does not need to get a Tax Deduction Account Number (TAN) to collect and pay TDS on property purchases to the government. However, PAN details of the buyer and seller are essential for deducting TDS using Form 26QB. If there are numerous buyers and sellers, multiple Form 26QBs will be required. Also, TDS is deducted in installments on a pro-rata basis if the property’s payment is made in installments. Here are other things buyers and sellers must remember:
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Buyers should deduct tax at the flat rate of 1% from the sale consideration.
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They must collect the PAN of the seller and verify it.
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The online form should have the PAN cards of both purchasers and sellers.
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The seller must provide their PAN card to the buyer to get the information regarding the TDS to the IT Department.
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They must ensure that the buyer verifies the taxes deducted in Form 26AS.
In case of multiple buyers and sellers, challan and Form 26QB are to be filled in by all the buyers for the respective shares of different sellers. For example, if one transaction has one buyer and two sellers, it will include two challans and Form 26QB. Four challans and Form 26QB will be required when there are two buyers and two sellers. The application of Section 194-IA will consider the total value of the property rather than the respective share of the buyer and seller. For instance, when a property is sold for Rs 80 Lakhs between two buyers/sellers, the respective share of sale consideration for each buyer/seller is ₹ 40 Lakhs. These are below ₹ 50 Lakhs, but Section 194-IA is still applicable because the total value of the property will be considered.
How is Form 26QB Generated Online?
You will have to follow these steps to generate Form 26QB during a property purchase process:
Step 1: Access e-payment of income tax by clicking on https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
Step 2: Select TDS on Property (Form 26QB)
Step 3: Fill in these details in the form:
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Taxpayer Info
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Address
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Property Details
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Payment Info
Some details will be auto-populated. These include:
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Financial Year
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Assessment Year
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Name & Status of Transferee
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Name & Status of Transferor
Step 4: Submit the filled form to proceed. You will see a confirmation screen. After confirming, a screen with these buttons will appear:
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Print Form 26QB
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Submit to the bank
You will also see a unique acknowledgment number, which is to be saved for later. Click on "Print Form 26QB" to print it. The next step is to click the "Submit to the bank" button to make the payment through Internet banking.
Step 5: On successful payment, you will see a challan counterfoil containing a CIN, payment details, and bank name used for e-payment.
Penalty Charges Related to Form 26QB
There are some penalty charges associated with Form 26QB as displayed in the following table along with the respective reasons.
Penalty Charges | Reasons |
|---|---|
1% interest on the amount not deducted by the buyer for TDS | TDS is deducted |
1% interest imposed monthly on the non-remitted TDS amount. | TDS is deducted but not paid to the government |
According to the provisions of Section 234E, taxpayers have to pay penalty charges of Rs. 200 per day in case of late filing of TDS. | Delay in filing TDS |
According to Section 271H, a penalty ranging from Rs. 10,000 to Rs. 1 lakh can be charged. However, no penalty applies if TDS is paid along with fees, interest, and the required statement within the specified time period. | Under Section 271H of IT Act 1961, penalty charges can only be charged according to this section if a required statement is not submitted within the specified time period. |
When and How Much is the TDS on the Property Sale?
The buyer must deduct the TDS from the stamp duty value of the property if it exceeds the sale value. For example, if someone buys a property for Rs 80 Lakh, but its stamp duty value is Rs 85 Lakh, a TDS of 1% will be calculated and deducted from the latter.
Conclusion
TDS on the purchase of immovable property was implemented to keep track of transactions related to the purchase and sale in the real estate sector. The objective is to control the highly speculative market where transactions happen partly in cash and partly through baking channels. It enables the government to clearly recognise instances where a property is bought for less than its stamp value.
Frequently asked questions
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Who has to pay TDS on the sale of the property
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The seller of a property has to pay TDS on its sale. The buyer deducts TDS on payment of consideration to the seller.
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How can I get Form 26QB online?
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You can generate it by logging into the Traces site.
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Should I deduct TDS on the purchase price of the property value of Rs 50 lakh or the entire amount at which I have purchased the property?
A
TDS applies on the stamp duty value or the entire amount of consideration whichever is higher. However, the property value should exceed Rs. 50 lakh.
Q
Is TAN required to report the TDS on the purchase of property?
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What should I do if I don’t have the seller’s PAN?
A
Since the seller(s)’s PAN is mandatory for deducting TDS and filing Form 26QB, you must take it beforehand.
Q
What is the date of deduction in Form 26QB?
A
It is the date on which the buyer deducts the TDS on a property purchase transaction.
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How can I use Form 26QB to pay TDS on the purchase of property?
A
To use Form 26QB to pay TDS on the purchase of property, you must visit the NSDL site and choose TDS on the sale of property. Fill in the required details, make the payment, and print Form 26QB generated and submitted to the bank.
Q
What is the total value of consideration in Form 26QB in the case of joint property?
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In case of a joint property, challan Form/ Form 26QB has to be filled in by each buyer for the respective share of each unique buyer-seller combination.
Prachi Jain
Chartered Accountant
Prachi Jain is a Chartered Accountant with a passion for simplifying finance and tax-related matters through her insightful and informative blogs. With a background in finance and a deep understanding of tax regulations, Prachi has established herself as a trusted source of financial wisdom. Prachi is committed to empowering her readers with the knowledge they need to make informed financial decisions. Her expertise and dedication shine through in every blog post, helping her audience navigate the intricacies of finance and taxes with confidence. Follow Prachi Jain's blog for practical insights and guidance on managing your finances effectively.
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