TDS on Purchase of Property ( Seller is Resident )

Property buyers and sellers often need clarity on TDS on Property Purchase. No need to worry—you’re not alone! This guide provides expert advice to help you navigate the process smoothly.

To keep a check on the extensive use of black money in immovable property transactions, the government of India has introduced a law, where the purchaser of a property has to deduct tax at source, i.e. TDS on purchase of property while paying the seller for his property.

Under Section 194IA of Income Tax Act, a buyer is required to deduct TDS at the rate of 1% of the sale consideration. This is applicable if the value of the payment is Rs.50 lakh or more. ( Please note, the buyer is required to deduct TDS, not the seller )

The Section covers residential property, commercial property, as well as land. You must note that transactions relating to the purchase of agricultural land are not covered under this provision.

If the payment is made by instalments, then TDS has to be deducted on each instalment paid (Pro-rata basis )

If there are multiple buyers or sellers involved, separate Form 26QB must be filed for each buyer-seller combination.

Consideration for immovable’ property shall include all charges like nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to the transfer of the immovable property. This is applicable for immovable property purchased on or after 1 September 2019.

The TDS on the immovable property has to be paid using Form 26QB within 30 days from the end of the month in which TDS was deducted.

After depositing TDS to the government, the buyer is required to furnish the TDS certificate in form 16B to the seller. This is available around 5-10 days after depositing the TDS. The buyer is required to obtain Form 16B and issues the form to the seller.

Buyers are not required to obtain a Tax Deduction Account Number (TAN) to deduct and deposit TDS. However, the PAN details of both the buyer and the seller must be provided during the TDS deduction process.

Penalty for non compliance of TDS : A penalty of 1% interest on the amount not deducted for TDS , Penalty of 1.5% of the deducted amount per month , Penalty of Rs. 200 per day for each day of default