TDS on sale of Property. Step by Step Guide.

What is TDS?

Tax Deducted at Source (TDS) is the amount of tax deducted from the individual's income when making payments, such as rent, salary, interest, commission, etc. For an easy and efficient collection of taxes, the government uses TDS as a method to collect taxes to keep a check on tax evasion. As per the Income Tax laws, an individual making a payment is liable to deduct tax if the payment is crossing a certain threshold and deposits the same into the account of the central government.

What is TDS on Sale of Property?

With the boost in the real estate demand and the government's measures to encourage homebuyers to affordable housing, there was a need to prevent tax fraud and avoidance relating to property transactions. The government of India has made it mandatory for a buyer of the property to deduct TDS when they buy a property worth over Rs 50 lacs. 1 % of the value of the property has to be deducted as TDS while paying to the seller.

TDS on Property is required to be paid by all taxpayers irrespective of the state in which the property is situated. It is deducted on all types of transactions of immovable properties, and it includes flat, building, plot, or store. However, it does not cover the transactions of agricultural land. It is excluded from the provisions.

Let us assume that a customer bought a property or land valued at Rs. 30 lacs or more at the time of payment; he is required to deduct tax at source (TDS). According to Section 194-IA of the Income Tax Act, TDS is not deducted if the total amount of the immovable property is less than 50 lakh rupees. It means that if a building, land, or plot is worth below 50 lakhs, no TDS shall be deducted at the time of transfer.

The buyer is liable to deduct the TDS amount and deposit it with the income tax officials and authorities within a month or 30 days. In no case, the seller is responsible for this process. For instance, if the TDS was deducted in June, the buyer has to pay the amount to the government by July end. You can make a payment using two options, either online or by visiting the authorised bank branch. Once the payment is made, you can download your TDS certificate (For 16B) from the TRACES website. It will be issued to the seller within two weeks. If the buyer fails to carry out this duty, he could pay a heavy penalty.

How to file a TDS return online?

The process on how to submit TDS is to fill Form 26QB — to deposit TDS online and generate Form 16B for the seller. Want to know how to file TDS, refer to the process given follows:

Step 1: The buyer has to visit the TIN-NSDL official website and click on Services from the menu to select e-payment-Pay taxes online.

Step 2: Click on Proceed after selecting the option TDS on property (Form 26QB)

Step 3: The details required to be filled by the buyer in Form 26QB are Pan and full address details of the buyer and seller, property details, along with purchase price, the date of the agreement, payment details, etc.

Step 4: All the parties are required to fill separate forms if the number of buyers in the transaction is more than one.

Step 5: After filling in all the required details, click on the process. It will take you to the payment page. Buyer has the option to submit TDS online as well as offline by visiting any of the authorised bank branches. Pan of both the buyer and seller is compulsory as the online form will not move ahead without the PAN details of the seller. The buyer is required to have the PAN of the seller to make payment of TDS. If the buyer doesn't have the PAN of the seller, 20% TDS will be deducted.

Step 6: If you choose to submit a TDS return online, the bank lets you print the challan. Or, if you choose to pay offline, an online receipt with a unique acknowledgement number will be generated. After the number is generated, you can visit the bank along with the payment amount of TDS. The bank will generate your challan and proceed with the payment.

Step 7: After the payment has been made, the next step is to download the TDS certificate to issue it to the seller. The buyers are required to log in to the TRACES website to generate the For 16B. The first-time users can register using the TRACES as a taxpayer. It requires your PAN card. Once you register, a challan number will be generated during the payment. After the completion of registration, the TDS certificate will be issued within 2 weeks i.e., 10-15 days.

Step 8: After a week of depositing the TDS payment, the buyer can log in to the TRACES portal for downloading Form 16B. Select Form 16B on the portal under the download menu, fill in the seller's PAN details and acknowledgement number. After filling in all the required information, you can download Form 16B.

Conclusion

Every individual, employee, and organisation needs to pay TDS. It was made to keep a check on tax evasion. If you don't know how to file TDS online, check the steps mentioned in the article. This step-by-step guide will help you how you can file the TDS and what forms are required to file TDS.

Also read:

1) Presumptive Tax: Ways to File Returns & Save Taxes for Creative Professionals
2) The USA vs India: Taxation System
3) How does the Income Tax System work in India?
4) Capital Gains Explained: Definition, Types, Exemptions & Tax Saving

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FAQs

Q. What is Form 26AS?

Ans. Form 26AS is a statement that shows the amount of tax deducted and deposited in a person's name in a particular financial year.

Q. What are the penalties for not deducting TDS?

Ans. The interest will be charged at 1% for every month or part of a month for a delay in the deduction if the tax is not deducted at all.

Q. What documents are required to file for TDS return?

Ans. The documents required to file for TDS return are as follows:

Form 16
Salary slips
Form 26AS
Form 16A
PAN card
Aadhar card
A gain statement
Deductions under Section 80D to 80U

Q. Is TDS calculated on the amount more than the property value of 50 lacs?

Ans. TDS is to be deducted from the amount paid to the seller. If the amount of property is sold at 75 lacs, then TDS would be calculated on the total amount, i.e., on 75 lacs.