TDS on Sale of Immovable Property – Section 194IA, Form 26QB
The Indian Income Tax Act requires the deduction of tax at source (TDS) on various transactions to ensure timely collection of taxes. One such provision is Section 194IA, which pertains to the sale of immovable property. This article provides a brief overview of Section 194IA and the associated Form 26QB.
Section 194IA of the Income Tax Act, 1961, mandates the deduction of TDS by the buyer of immovable property. According to this section, if the sale consideration for a property exceeds Rs. 50 lakh, the buyer is required to deduct 1% of the total sale consideration as TDS and remit it to the government. The responsibility of deducting TDS lies with the buyer, and failure to do so may attract penalties and interest.
Section 194IA applies to both residential and commercial properties. It covers all types of immovable properties, including land, buildings, apartments, and any other property that is not considered movable under the law. The provision is applicable to all types of buyers, including individuals, HUFs (Hindu Undivided Families), firms, companies, and other entities.
To comply with the TDS requirements under Section 194IA, the buyer is required to fill and submit Form 26QB. This form serves as an intimation to the Income Tax Department regarding the TDS deduction made on the property sale. It captures essential details such as the buyer's and seller's information, property details, sale consideration, and the TDS amount deducted. Form 26QB needs to be submitted online on the TIN-NSDL website or through authorized banks.
Key Points to Note:
TDS Rate: The TDS rate under Section 194IA is 1% of the total sale consideration. However, if the seller does not provide their Permanent Account Number (PAN), the TDS rate increases to 20%.
TAN Requirement: The buyer is not required to obtain a Tax Deduction and Collection Account Number (TAN) to deduct TDS under Section 194IA. The buyer can use their PAN for TDS compliance.
TDS Payment and Filing of Form 26QB: The buyer needs to remit the TDS amount to the government within 30 days from the end of the month in which TDS was deducted. Form 26QB must be filed within 30 days from the end of the quarter in which TDS was deducted.
Issuance of TDS Certificate: After the successful filing of Form 26QB and payment of TDS, the buyer should download the TDS certificate (Form 16B) from the TRACES portal. The TDS certificate serves as proof of TDS deduction and can be shared with the seller.
To download Form 16B, which is the TDS certificate for the buyer in a property transaction, you can follow these steps:
1. Visit the TRACES (TDS Reconciliation Analysis and Correction Enabling System) website at https://www.tdscpc.gov.in.
2. Register on the TRACES website using your valid PAN (Permanent Account Number) and other required details.
3. After registering, log in to your TRACES account using the credentials you created.
4. Once logged in, navigate to the "Downloads" section.
5. In the Downloads section, select "Form 16B" from the available options.
6. Provide the necessary details such as the Financial Year, Quarter, and the acknowledgement number of the Form 26QB (the TDS return filed by the buyer).
7. Verify the details you entered and submit the request.
8. If the details provided are correct, the system will generate a unique Request Number.
9. Wait for the system to process your request. Once processed, you will receive an email notification on the registered email address.
10. Return to the TRACES website and navigate to the "Downloads" section.
11. Select "Requested Downloads" and enter the Request Number generated earlier.
12. Click on the "HTTP Download" link to download Form 16B in a PDF format.
Please note that downloading Form 16B from the TRACES website requires registration and authentication. It is advisable to consult the official TRACES website or seek professional assistance for detailed instructions and to ensure accurate compliance with the process.
Consequences of Non-Deduction or Non-Payment of TDS:
1. Penalty and Interest: If the buyer fails to deduct or pay the TDS amount within the specified time frame, they may be liable to pay a penalty. The penalty is levied at 1% per month or part of the month on the amount of TDS that should have been deducted. Additionally, interest may also be charged at a rate of 1.5% per month or part of the month from the date on which TDS was supposed to be deducted until the date of actual deduction.
2. Disallowance of Expenses: If the buyer fails to deduct TDS, the Income Tax Act empowers the Assessing Officer to disallow the expenses claimed by the buyer as a result of the transaction. The disallowed expenses are added to the buyer's taxable income, resulting in higher tax liability.
Consequences of Non-Filing of Form 26QB:
1. Late Filing Fee: Failure to file Form 26QB within the prescribed time limit attracts a late filing fee. As of the knowledge cutoff in September 2021, the late filing fee was Rs. 200 per day until the return was filed, with a maximum penalty not exceeding the amount of TDS. It is essential to refer to the latest regulations or consult a tax professional for accurate and up-to-date information regarding the late filing fee.
2. Non-Issuance of TDS Certificate: Form 16B, the TDS certificate, serves as proof of TDS deduction and is required by the seller for their tax compliance. Failure to file Form 26QB may result in the non-issuance of the TDS certificate, which can create difficulties for the seller in fulfilling their tax obligations and claiming credit for the TDS deducted.
3. Scrutiny by the Income Tax Department: Non-filing or delayed filing of Form 26QB may trigger scrutiny from the Income Tax Department. The department may initiate inquiries, notices, or audits to investigate the non-compliance and ensure the proper deduction and remittance of TDS. This can result in additional assessments, penalties, and legal consequences. It is crucial for buyers involved in property transactions to comply with the TDS provisions and file Form 26QB within the specified timelines to avoid these consequences. Non-compliance can lead to financial liabilities, complications in tax filings, and unnecessary scrutiny by the tax authorities. It is advisable to seek professional guidance or consult the Income Tax Department's guidelines for accurate compliance and adherence to the prescribed procedures.
Meaning of Agricultural Land:
A land is not treated as agricultural land if:
· It is situated within jurisdiction of Municipality or Cantonment Board which has a population of not less than 10,000 or
· It is situated in any area within below given distance measured aerially:
Population of the Municipality
More than 10,000 but does not exceed 1,00,000
More than 1,00,000 but does not exceed 10,00,000
Distance from Municipal limit or Cantonment Board
Within 2 kms
Within 6 kms
Within 8 kms
Meaning of Immovable Property :-
Immovable property means any land (other than agricultural land) or any building or part of building.
· The provisions of this section is not applicable where section 194LA regarding compulsory acquisition is applicable.
· If the seller is non-resident or NRI then TDS is to be deducted under section 195 on basis of capital gains and not under this section.
When it comes to under construction properties, TDS will be deducted on installments paid on or after 1st June, 2013. No TDS is applicable on the installments paid before 1st June, 2013