What is TDS on Sale of Property U/S 194IA?
As per Section 194IA of the Income Tax Act, and also as per the Budget 2022, a buyer of immovable property has to deduct TDS on Sale of Property @1% from the sale proceeds he is going to pay to the seller for purchasing the immovable property subject to a minimum threshold limit of ₹50 Lakhs.
However, as per the Budget 2022 announcement, TDS @ 1% is to be deducted and deposited by the buyer to the Central Govt. account, on the higher of the following two values:
- The Transaction Value/Sale proceeds and
- The Stamp Duty Value /Registered Value
So, TDS of 1% is to be deducted on the higher of the above two values. However, TDS will be deducted only when any one of the above two values exceeds ₹50 Lakhs.
Therefore, TDS on the Sale of Property is another kind of advance tax that the Buyer of the immovable property deducts/collects from the Seller of the property and deposits the same to the Government Account and the Seller receives the balance amount.
Later on, the Seller takes credit for this advance tax payment made by the Buyer on his behalf while filing his return of Income.
Who Pays TDS on Sale of Property/Who has to pay TDS on Sale of Property?
As per section 194 IA of the Income Tax Act, the buyer of the immovable property has to collect/deduct TDS on Sale of Immovable Property @1% of the transaction value/Stamp Duty value, whichever is higher and has to deposit the same to the Government Exchequer within one month from the end of the month in which such collection/deduction was made.
Main Features of TDS on Sale of Immovable Property?
Everyone should keep in mind that TDS on the Sale of Immovable Property(except rural agricultural land) is an advance tax and not a tax on the sale of immovable property. Now let’s check out the main features of TDS on Sale of immovable property.
- TDS Rate: TDS is to be deducted and deposited @1% from the payment to be made to the Seller;
- Eligibility: TDS shall be applicable only when transaction value exceeds ₹50 Lakhs;
- Valuation: TDS shall have to be deducted on the Sale value or Stamp Duty value whichever is higher(It is as per Budget 2022);
- TDS Rule: If the transaction value is ₹60 lakhs, TDS shall have to be deducted on the entire ₹60 lakhs and not on ₹10 lakhs only;
- Payment of TDS: TDS on sale of the property so deducted has to be deposited within 30 days from the end of the month in which the transaction was made;
- Liability: So, the liability to deduct and deposit the TDS amount, lies on the Buyer and not on the Seller;
- Challan/Form: TDS so deducted is to be deposited using Form 26QB Challan/Return by the buyer;
- PAN No: PAN No. of the seller is to be quoted in Form 26QB by the Buyer;
- Form 16B: Finally, the Buyer would download Form 16B from the TRACES website and issue the same to the Seller;
- Penalty: Buyer is liable to issue a TDS certificate in Form 16B to the Seller within 15 days from the due date of filing return in Form 26QB.
Which Properties are eligible for TDS on Sale?
All the immovable properties such as residential properties, commercial properties, and even lands are liable for TDS on Sale. But rural agricultural lands are not subjected to TDS on Sale of Property. So, rural agricultural lands are exempted from TDS deduction.
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TDS on Sale of property in case of Joint Sellers
As per the provisions of the Income Tax Act, there shall be no TDS on Sale of Property if the sale consideration for each co-owners or joint Seller does not exceed ₹50 Lakhs.
This means that in the case of joint sellers of the immovable property, the threshold limit of ₹50 Lakhs shall be applicable for each co-owners. For every individual, the limit has to be measured in terms of sale consideration.
Therefore, TDS on Sale of Property does not depend on the sale consideration of the property entirely. It also depends on the amount of sale consideration to be received by each co-owner or joint Sellers subject to the condition of ₹50 Lakhs.
TDS on Sale of Property by NRI
Whenever an NRI sells any immovable property in India, it attracts TDS irrespective of the transaction value. The Buyer of the immovable property deducts the TDS amount from the sale proceeds and remits the balance amount to the NRI Seller.
TDS on Sale of Property by NRI is governed by Section 195 of the Income Tax Act. As per section 195 of the said Act, the applicability of TDS shall be determined based on the amount of capital gains earned by the NRI Seller.
Therefore, this section is a little bit different from Section 194IA. Here transaction value of the property to be sold does not play any significant role in deciding the TDS rate on sale or transfer of property.
TDS @20% or 30% is to be deducted on the sale or transfer of immovable property by NRI, irrespective of the transaction value. Rather the residential status of the Seller is to be determined as there is no threshold limit of ₹50 Lakhs, unlike Section 194IA.
What is the Rate of TDS on Sale of Property by NRI?
In order to determine the rate of TDS on Sale of Property by NRI, the residential status of the seller is to be determined and not of the buyer and also the period of ownership of the property in question by the NRI needs to be taken into consideration.
TDS on Sale of Property by NRI is to be deducted as per the following rates:–
|Nature of Capital Gains||Period of Holding by NRI||Rate of TDS on Sale of Property by NRI|
|Long Term Capital Gains(LTCG)||Property held for more than 2 years||20% of the Capital Gains|
|Short Term Capital Gains(STCG)||Property held for less than 2 years||Applicable Income Tax Slab Rates of NRI|
Also, one needs to consider the surcharge and education cess on the above Tax. The Buyer must obtain the PAN of the NRI Seller, otherwise, the tax would be deducted on the higher rates as per Section 206AA of the Income Tax Act.
Is TDS Applicable on Sale of Property by NRI?
Yes, as per Section 195 of the Income Tax Act, the Buyer of the property has to deduct TDS from the sale proceeds of the NRI Seller. However, before making any TDS deduction, the NRI seller may apply in Form No-13, as per the provisions of Section 197 of the I.T Act, for Lower TDS or NIL TDS deduction.
The NRI Seller is required to hand over such certificate to the prospective Buyer, as given by the Income Tax Officer on the basis of the application. Accordingly, the Buyer would be responsible to deduct TDS as per the rates mentioned in such certificate.
Also, the buyer/ payer needs to obtain a Tax Deduction Account Number (TAN) before making the tax payment. He shall file form 49B which is covered under section 203A of theI.T Act. It is mandatory to mention the TAN of the deductor for the purpose of TDS payment.
Is TDS on Property 0.75 or 1%?
TDS on Property is 1% of the Transaction Value or Stamp Duty Value whichever is higher in case of resident seller. But TDS would be applicable only when anyone of the above value would exceeds ₹50 Lakhs.
However, in case of NRI seller, the TDS rate would extend to 20% considering the period of holding.
When should we pay TDS on Sale of Property?
Any TDS deducted under section 194IA shall be paid to the credit of the Central Government within a period of 30 Days from the end of the month in which the deduction was made. Further, it shall be accompanied by a challan-cum statement in Form 26QB.
Do we have to pay TDS on Sale of Property?
Yes, as per the provisions of Section 194IA, a Buyer has to deduct and deposit TDS @1% on the entire sale value and credit the same to the Central Govt. using Form 26QB.
In this case, the buyer must obtain PAN of the Seller and quote the same in Form 26QB.
How is TDS on Immovable Property Calculated?
As per Section 194IA of the Income Tax Act, TDS on Sale of Immovable Property is calculated @1% of the consideration payable to the Seller. But if no PAN is submitted by the Seller, TDS @20% is to be deducted from the sale consideration.
Also, TDS shall be applicable if the sale consideration exceeds ₹50 Lakhs, otherwise no TDS shall be deducted. Further, in case of part payments or advance given, TDS shall have to be deducted only if the total sale consideration exceeds ₹50 Lakhs.
As per Budget 2022: However, as per the Budget 2022 pronouncement, w.e.f 01.04.2022, there is little ammendment in this Act. Now the TDS amount shall have to be calculated on the basis of higher of the following two values:
a. Sale consideration/ Transaction Value and
b. Stamp Duty Value/ Registered Value.
TDS is required to be deducted @1% of the higher of the above two values, provided any one of the above two value exceeds ₹50 Lakhs.
Example: Sale Value ₹45 Lakhs but Stamp Duty Value is ₹52 Lakhs. Calculate the TDS amount?
In the given case, though the sale consideration does not exceed ₹50 Lakhs, but stamp duty valuation exceeds the threshold limit of ₹50 Lakhs. So, TDS is required to be calculated on the higher value of ₹52 Lakhs. So, TDS amount will be ₹52,000.
Who is liable to deduct TDS on Immovable Property?
Ofcourse, the responsibility to deduct TDS on Immovale Property lies with the Buyer. At the time of paying the sale consideration to the Seller, Buyer needs to deduct TDS and deposit the same to the Central Government account within 30 days from the end of the month in which such sale consideration was made.
Can we claim TDS on Immovable Property?
Yes, the Seller of the immovable property can claim TDS on Immovable Property as TDS U/S 194IA is an advance tax deducted and deposited by the Buyer of the property on behalf of the Seller.
Therefore, TDS on immovable property is refundable provided Form 16B is properly genertaed and issued by the Buyer to the Seller containing all the relevant details of such sale and also the PAN of the sSeller which ssall help the Seller to claim TDS on sale of Immovable Property.