TDS on Property Transactions: Stepwise Guide with Form 26QB & 16B
Buying or selling property in India involves more than just signing an agreement and paying the price. Tax Deducted at Source (TDS) rules apply when the property value crosses a specified limit. To stay compliant, buyers must deduct TDS, deposit it to the government using Form 26QB, and issue Form 16B to the seller. Here’s a comprehensive guide.
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What is TDS on Property Transactions?
TDS on property transactions is a tax deducted by the buyer when purchasing immovable property (other than agricultural land). If the property’s sale value is ₹50 lakh or more, the buyer must deduct tax before making payment to the seller and deposit it with the government.
Why is TDS Deducted on Property Purchases?
TDS ensures that tax authorities receive a portion of the tax at the time of property sale. It helps:
- Prevent tax evasion by property sellers.
- Ensure the seller reports the capital gains in their tax return.
TDS Rates and Applicability
Current TDS rate on property transactions (1%)
A flat 1% TDS is applicable on the total property value if it is ₹50 lakh or more.
Conditions when TDS applies
- Property must be immovable (land or building).
- Buyer must deduct TDS at the time of payment or credit, whichever is earlier.
Exemptions (e.g., agricultural land)
- No TDS if the property is agricultural land in rural areas.
- Transactions below ₹50 lakh are also exempt.
TDS Rates and Applicability
Current TDS rate on property transactions (1%)
A flat 1% TDS is applicable on the total property value if it is ₹50 lakh or more.
Conditions when TDS applies
- Property must be immovable (land or building).
- Buyer must deduct TDS at the time of payment or credit, whichever is earlier.
Exemptions (e.g., agricultural land)
- No TDS if the property is agricultural land in rural areas.
- Transactions below ₹50 lakh are also exempt.
Step-by-Step Guide to TDS Deduction on Property
- Verify Seller’s PAN: Ensure the seller provides a valid PAN to avoid higher deduction.
- Deduct 1% TDS from the payment amount at the time of making payment.
- Deposit TDS using Form 26QB within 30 days from the end of the month in which deduction is made.
- Provide Form 16B to the seller as proof of TDS deposited.
Step-by-Step Guide to TDS Deduction on Property
- Verify Seller’s PAN: Ensure the seller provides a valid PAN to avoid higher deduction.
- Deduct 1% TDS from the payment amount at the time of making payment.
- Deposit TDS using Form 26QB within 30 days from the end of the month in which deduction is made.
- Provide Form 16B to the seller as proof of TDS deposited.
What is Form 26QB?
Form 26QB is a challan-cum-statement used for depositing TDS deducted on property purchases.
Key components of the form
- Details of buyer and seller ( PAN , address)
- Property details and sale value
- TDS amount deducted
Process to fill and submit Form 26QB online
- Visit the TIN NSDL/Protean website.
- Select e-payment → Form 26QB.
- Enter property, buyer, and seller details.
- Pay online via net banking or debit card.
Banks authorized for TDS payment
Most nationalized and private banks like SBI, HDFC, ICICI, and Axis are authorized.
What is Form 16B?
Form 16B is the TDS certificate that the buyer provides to the seller after depositing TDS.
How to download and provide Form 16B to the seller
- Log in to the TRACES portal.
- Download Form 16B after the TDS payment reflects.
- Provide a signed copy to the seller.
Importance of the seller in claiming credit
The seller uses Form 16B to claim TDS credit while filing their income tax return.
Due Dates for Filing Form 26QB and Issuing Form 16B
- Form 26QB: Within 30 days from the end of the month of deduction.
- Form 16B: Within 15 days of filing Form 26QB.
Penalties & Consequences of Non-Compliance
Interest on late deduction or deposit
- 1% per month for late deduction.
- 1.5% per month for late deposit.
Penalties for not filing Form 26QB/16B
- Late fee of ₹200 per day under Section 234E.
Legal consequences of default
- Penalty up to the TDS amount and prosecution under the Income Tax Act .
Common Mistakes to Avoid in TDS on Property
- Failing to deduct TDS on time results in penalties and interest.
- Incorrect property value used – always deduct from the total sale value, not just the amount above ₹50 lakh.
- Errors in PAN details – an incorrect PAN can block TDS credit for the seller.
- Missing filing deadlines results in fines and delays.
Conclusion
For property purchases of ₹50 lakh or more, the buyer must deduct 1% TDS, deposit it through Form 26QB, and provide Form 16B to the seller. Proper compliance ensures no penalties and smooth tax credit for the seller.
Hi there! I’m a Chartered Accountant with over 20 years of experience in financial accounting and a passion for writing. I enjoy simplifying complex topics like GST and income tax, believing that learning should be a lifelong journey. I'm here to share insights and make financial matters easier for everyone!
Frequently Asked Questions
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Who deducts TDS on property purchases?
The buyer deducts and deposits TDS when the property value is ₹50 lakh or more.
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Is TDS applicable on joint property purchases?
Yes. Each buyer must deduct TDS on their share of the total payment.
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Should TDS be deducted on the full value or only above ₹50 lakh?
TDS is deducted on the entire sale value, not just the amount above ₹50 lakh.
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Can Form 26QB be corrected or amended?
Yes. Corrections can be made online through the TRACES portal.
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What is the due date for depositing TDS on property?
Within 30 days from the end of the month in which TDS is deducted.
