From June 1st, 2013, when a buyer buys immovable property (i.e. a building or part of a building or any land other than agricultural land) costing more than ₹ 50 lakhs, he has to deduct TDS when he pays the seller. This has been laid out in Section 194-IA of the Income Tax Act.
To find out what qualifies as agricultural land, click here.
Here are the requirements of this section:
- The buyer has to deduct TDS at 1% of the total sale consideration. Note that the buyer is required to deduct TDS, not the seller.
- No TDS is deducted if sale consideration is less than ₹ 50 lakhs. If installments are being paid, TDS has to be deducted on each installment.
- Tax is to be paid on the entire sale amount. For example, if you have bought a house at ₹ 55 lakh, you have to pay tax on ₹ 55 lakh and not on ₹ 5 lakh (i.e. ₹ 55 lakh – ₹ 50lakh). This is applicable even when there is more than 1 buyer or seller.
- If you are the buyer, you do not need to obtain a TAN (Tax Deduction Account Number) number.
- If you are the seller, you have to provide your PAN or else TDS is deducted at 20%. PAN of the buyer is also mandatory. TDS is deducted at the time of payment or at the time of giving credit to the seller, whichever is earlier.
- This TDS has to be deposited along with Form 26QB within 7 days from the end of the month on which TDS was deducted.
- After depositing TDS to the government, the buyer is required to furnish the TDS certificate to the seller. This is available around 10-15 days after depositing the TDS.
- Thus for paying TDS, the seller is required to obtain Form 16B and the buyer is required to obtain Form 26QB.
Want to know the steps to pay TDS and to obtain Form 16B (for the seller) or Form 26QB (for the buyer)?