How to Pay TDS on Property Purchases

According to a notification issued on 1st of June 2013 by the Central Board of Direct Taxes, a mandatory tax (withholding tax) has to be withheld on all property purchases that exceed or are equal to Rupees Fifty Lakhs, the only exception being agricultural land. To be very precise, Sec 194 IA of the Income Tax Act, 1961 clearly states that the purchaser of any property with value of Fifty Lakhs and above (except agricultural lands), is required to deduct a 1 per cent tax at the time of sale consideration payment. The purchaser is required to deduct the tax (TDS) at the time of payment and is then required to deposit the amount in the Government account. The motto behind this move is to track all high value property transactions which are not being officially registered at present. What is the rate of deduction on property purchases? While the base rate for deduction is 1 per cent, it can go as high as 20 per cent, especially if the seller is not willing to share his PAN details with the buyer. The statute applies to all properties, including the ones that are purchased through home loans. The tax is calculated on the entire sale consideration amount. Do property buyers or sellers need to apply for TAN (Tax Deduction Account Number)? Unlike in the case of all other TDS cases, in the case of property transactions, buyers and sellers are exempt from procuring TAN (Tax Deduction Account Number), and hence property buyers and sellers do not need to apply TAN to pay TDS. Can the TDS be paid in instalments? If the payment to the property seller is done in one go, then the TDS needs to be paid to the Government in one shot as well; however, if the purchaser is making payments to the seller in instalments, then the TDS can also be paid in instalments to the Government. What if multiple parties are involved in the real estate transaction? If there are more than one buyer or seller, then Form 26QB and Challan is required to be filled by all buyers for respective sellers as well as for their individual shares. For instance, if there are one buyer and three sellers, then four forms are to be filled and if there are two buyers and three sellers, then five forms are to be duly filled. How to pay TDS on property purchases? The easiest way to pay TDS on real estate purchases is by logging on to the official website of NSDL-TIN. You can select the 'Sale of Property' option. You can then click on form 26QB (form for depositing TDS on property) and fill the details. Once you have duly filled the form 26QB, you can select the 'Proceed' option. Once you select this option, you would be required to validate you PAN details, after which you can click on 'Confirm'. You will receive payment confirmation and details at this stage. You must log-in to your net banking site using your user id and password, and then enter the above payment detail, after which a challan containing CIN, bank name and payment details is generated by the online portal of your bank. This Challan or receipt is the proof of payment of TDS. Once the buyer receives this Challan, he/she is required to download form 16B from CPC-TDS (official website of centralized processing cell), also known as TRACES. Within 15 days of submitting this Challan, the property buyer is required to hand over the TDS certificate (in form 16B) to the property seller, who can claim the credit for this deduction against his/her tax liability.