/ TDS

TDS on Purchase of TDS on Real Estate Transactions

TDS

Overview on TDS on Purchase of TDS on Real Estate Transactions

What is TDS on Property Purchases?

TDS (Tax Deducted at Source) is a tax mechanism under Section 194-IA of the Income Tax Act, applicable when purchasing immovable property (excluding agricultural land).

  • Applicable if the consideration value or stamp duty value (whichever is higher) is ₹50 lakhs or more.
  • TDS to be deducted at 1% of the sale consideration by the buyer and deposited with the government.

Purpose of TDS on Real Estate Transactions

  • The taxpayer must ensures tax compliance during high-value transactions.
  • Prevents tax evasion by deducting tax at the source.
  • Buyer is responsible for deduction and deposit.
  • Seller can claim the TDS as credit while filing ITR.

When is TDS Applicable?

  • When sale consideration or stamp duty value ≥ ₹50,00,000
  • On residential and commercial properties
  • Even if payment is made in installments
  • Applies whether single or multiple buyers/sellers are involved

Who Deducts the TDS?

  • Buyer of the property deducts TDS at 1% of sale consideration
  • TDS must be deposited within 30 days from the end of the month in which it was deducted
  • Form 26QB must be filed, and Form 16B issued to the seller within 15 days

TDS Rate

  • 1% for Indian resident sellers (with valid PAN)
  • 20% or higher for NRIs, based on capital gains, surcharge & cess
  • TDS @ 20% if seller does not furnish PAN

Example of TDS Calculation

Scenario: Mr. A buys a flat from Mr. B for ₹80,00,000 AND ₹20,00,000 paid as advance on 1st August 2023 , ₹60,00,000 paid on 15th August 2023 (registration date)

TDS Deduction:

  • Total TDS = INR 80,000 (1% of INR 80,00,000)
  • INR 20,000 deducted on 1st August (to be deposited by 30th September 2023)
  • Rs. 60,000 deducted on 15th August (to be deposited by 31st October 2023)

Form 16B must be issued within 15 days of TDS deposit.

Exemptions from TDS on Property Purchase :

TDS is not required under the following situations:

  • Sale Consideration and Stamp Duty Value < INR 50,00,000
  • Transfer from NRI to another NRI via Inheritance or Gift
  • Property purchased from Central/State Government or specified authority
  • Purchase from a recognised financial institution or housing finance company
  • In case Purchase from resident Indian relative below INR 50 lakhs and stamp duty < INR 50,000
  • Transfer of Agricultural Land

Documents Required for TDS Filing

Following information and details for deposit of TDS on purchases of property in Delhi: the following details are Required for TDS deposit on property sale (Form 26QB):

  1. Property Details
    • Type of Property: Residential, commercial, land, etc.
    • Full Address: Including state, district, PIN code
    • Date of Agreement/Transfer
    • Total Sale Consideration (in INR)
    • Payment Mode: Lump sum or in installments
    • Amount Paid or Credited till Date
  1. Buyer Details (Deductor)
    • Full Name
    • PAN (Mandatory, verified with ITD)
    • Complete Address
    • Email ID
    • Mobile Number
    • Residential Status: Resident or Non-Resident
    • Share of Property Ownership (if multiple buyers)
    • Date of Payment or Credit
  1. Seller Details (Deductee)
    • Full Name
    • PAN (Mandatory, else TDS @ 20% under Sec 206AA)
    • Complete Address
    • Email ID
    • Mobile Number
    • Residential Status: Resident or NRI
    • Share of Property Ownership (if multiple sellers)
  1. Transaction Details
    • TDS Amount: 1% of sale consideration (if seller is Resident and PAN is available)
    • Date of TDS Deduction
    • Payment Method: Net banking, debit card, or challan for offline payment
  1. Bank Details (for Payment)
    • Bank account (from which payment is made)
    • the Bank selected for e-payment via Net Banking (or challan if paying physically)

Additional Notes:

Item Note
Form 26QB Filed per buyer-seller combination. For 2 buyers and 2 sellers, file 4 forms.
PAN Verification Ensure PANs of both buyer and seller are correct – errors will lead to TDS mismatch.
Tax Payment Due Date TDS must be deposited within 30 days from the end of the month in which payment is made.
TDS Certificate Buyer must download and issue Form 16B to the seller from TRACES within 15 days of Form 26QB due date.

How to Rectify Mistakes in TDS Filing

Buyers can correct errors in Form 26QB via the TRACES portal:

  • Common mistakes that can be rectified Incorrect PAN of buyer/seller, Wrong property details, Incorrect TDS amount or challan details
  • Correction Process: Log in to TRACES → Request for Correction → Submit Online Correction and Digital Signature Certificate (DSC) may be required
  • Excess TDS Deduction: Seller can claim a refund while filing the ITR

Common Mistakes to Avoid

  1. Not Deducting TDS on Time
    • When: At the time of payment to the seller
    • Consequence: Interest @ 1% per month + Penalties
  1. Incorrect TDS Calculation
    • Mistake: Calculating TDS on loan amount only
    • Correct Method: Deduct 1% on entire sale value, not just the financed portion
  1. Missing Payment Deadline
    • Deadline: Within 30 days from the end of the month in which TDS is deducted
    • Interest for Delay: 1.5% per month till payment
  1. Not Issuing Form 16B
    • Buyers mustDownload Form 16B from TRACES after TDS deposit and Provide it to the seller for claiming TDS credit
  1. Incorrect PAN Details
    • A wrong PAN of buyer or seller leads to Higher TDS @ 20% or Rejection of credit in seller’s ITR. and we should always verify PAN before filing Form 26QB
  1. Failing to File TDS Return
    • Form 26QB serves as the TDS return for property purchases
    • Not filing it may result in Penalty under Section 234E: ₹200/day till the return is filed (max up to TDS amount)

Practical Tips For Sellers:

  • Share correct PAN and verify TDS credit in Form 26AS.
  • Apply for Lower Deduction Certificate if eligible (especially NRIs).
  • Keep copies of all related documents.

Practical Tips For Buyers:

  • Deduct and deposit TDS within 30 days of payment.
  • Fill details accurately in Form 26QB or 27Q.
  • Consult a tax advisor for complex transactions or NRI sellers.

Consequences of Delay or Default

Default Type Penalty/Interest
Late payment of TDS 1% per month (or part) from date of deduction to date of payment
The Late filing of Form 26QB INR 200 per day (max up to TDS amount)
Non-payment or incorrect filing Penalty of ₹10,000 to ₹1,00,000 under Section 271H (waivable if paid within 1 year)

Conclusion

TDS compliance under Section 194-IA is mandatory for all property purchases (₹50 lakhs+). Taxpayer Ensure Timely deduction and deposit via Challan 26QB, Generation and issuance of Form 16B, Accuracy in PAN and transaction details and Non-compliance can lead to interest, penalties, or legal complications.

Taxpayer needed Just upload TDS return along with the TDS certificate, and we’ll do all the TDS on property-related working. Filing is quick, secure, and accurate. Filing Your TDS on property for FY 2025-26? Do it in just 5 minutes—FREE on www.CAINDELHIINDI.com! Avoid penalties and technical delays—file your TDS Return on sale or purchase of property now on www.caindelhiindia.com Our platform is user-friendly, fast, and complete For error-free transactions and peace of mind. Our chartered accountant or tax advisor/expert is here to help. Email: singh@carajput.com  or Call/WhatsApp: 9555 555 480

**********************************************************

If this article has helped you in any way, i would appreciate if you could share/like it or leave a comment. Thank you for visiting my blog.

Legal Disclaimer:
The information / articles & any relies to the comments on this blog are provided purely for informational and educational purposes only & are purely based on my understanding / knowledge. They do noy constitute legal advice or legal opinions. The information / articles and any replies to the comments are intended but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as a legal advice or an indication of future results. Therefore, i can not take any responsibility for the results or consequences of any attempt to use or adopt any of the information presented on this blog. You are advised not to act or rely on any information / articles contained without first seeking the advice of a practicing professional.