To streamline the tax process for property transactions, the Income Tax Department mandates TDS (Tax Deducted at Source) deductions for specific purchases. According to the Finance Act, 2013, individuals or Hindu Undivided Families (HUFs) purchasing properties valued at ₹50 lakh or more must deduct 1% TDS on the transaction value. The deducted amount must be deposited using Form 26QB within a prescribed timeline.
This guide elaborates on Form 26QB, covering its filing process, rules, and implications.
What is Form 26QB?
Form 26QB is a combined challan and statement used for depositing TDS on property transactions. Under Section 194-IA of the Income Tax Act, if the property’s value exceeds ₹50 lakh, TDS must be deducted at 1% of either the transaction value or the stamp duty valuation, whichever is higher.
Example:
Suppose Mr. D buys a property from Ms. F for ₹70 lakh, and the stamp duty value is ₹75 lakh. The TDS will be calculated on ₹75 lakh, leading to a deduction of ₹75,000. Ms. F will receive ₹69.25 lakh after TDS.
Properties Subject to TDS
The TDS deduction applies to immovable properties such as:
- Residential properties
- Commercial spaces
- Plots of land without construction
- All other immovable properties, except agricultural land
TDS is applicable only if the transaction value is ₹50 lakh or more.
Criteria for Non-Agricultural Land
Land is considered non-agricultural and subject to TDS if it meets any of the following conditions:
- It is located in an urban area governed by a municipality or cantonment board with a population exceeding 10,000.
- It lies within specified distances from municipal boundaries:
- 2 km for populations of 10,000–1,00,000
- 6 km for populations of 1,00,000–10,00,000
- 8 km for populations above 10,00,000
Calculating TDS on Property
TDS is deducted based on the higher of the sale consideration or the stamp duty valuation. It is applicable to the entire amount if the property’s value exceeds ₹50 lakh, not just the amount exceeding ₹50 lakh.
Example:
Ms. T purchases a property from Mr. R for ₹90 lakh, while its stamp duty value is ₹95 lakh. In this case, TDS will be calculated on ₹95 lakh, resulting in a deduction of ₹95,000. The seller, Mr. R, will receive ₹89.05 lakh after TDS.
Filing Form 26QB
Buyers must file Form 26QB within 30 days from the end of the month in which the TDS was deducted. For example, if a transaction occurs on September 20, 2024, the form must be filed by October 30, 2024.
Steps to File Form 26QB:
- Access the Income Tax Portal:
Visit the official website and log in. - Navigate to TDS Payment:
Go to the "e-Pay Tax" section and select "TDS on Sale of Property (26QB)." - Enter Transaction Details:
Provide details of the buyer, seller, property, and TDS amount. - Make Payment:
Choose between "Pay Now" or "Pay Later" options to deposit the TDS. - Download Acknowledgment:
After payment, download the receipt for your records. - Generate TDS Certificate (Form 16B):
Log in to the TRACES portal and issue Form 16B to the seller within 15 days.
Rules Under Section 194-IA
- TDS Deduction Timing:
Deduct TDS at the time of payment or credit to the seller. - No TAN Requirement:
Buyers do not need a Tax Deduction Account Number (TAN) but must provide PAN details of both parties. - Handling Multiple Buyers or Sellers:
Separate Form 26QB must be filed for each buyer-seller combination. - Instalment Payments:
Deduct TDS proportionally for each instalment paid. - Agricultural Land Exemption:
TDS does not apply to agricultural land unless it falls outside the legal definition of agricultural property.
Where Sellers Can View TDS Deduction
The deducted TDS will reflect in Part F of Form 26AS, accessible through the income tax portal.
Penalties for Non-Compliance
|
Reason |
Penalty/Interest |
|
Delay in filing Form 26QB |
₹200 per day under Section 234E |
|
Non-remittance of deducted TDS |
1.5% per month on the unpaid amount |
|
Failure to deduct TDS |
1% per month on the un-deducted amount |
|
Non-submission of required forms |
Penalty ranging from ₹10,000 to ₹1,00,000 (271H) |
Conclusion:
Form 26QB ensures compliance with TDS rules during property transactions. Buyers should strictly adhere to timelines and procedures to avoid penalties. Understanding the nuances of TDS calculations, filing requirements, and exemptions simplifies the process and ensures hassle-free transactions.
If you have any further questions or need assistance, feel free to reach out to us at admin@ushmaassociates.com or info@nricaservices.com, or contact us via call/WhatsApp at +91 9910075924.
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Disclaimer: Aim of this article is to give basic knowledge about the topic to people who are not in touch with Indian tax norms. When anybody is dealing with these kinds of cases practically, he shall consider all relevant provisions of all applicable Laws like FEMA/Income Tax/RBI /Companies Act etc.