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TDS on Purchase of Property - Section 194-IA

(Provision applicable from 1st June 2013)

Income Tax Department requires all property buyers(transferee) to deduct tax @ 1% on payments made by them to the seller(transferor)  towards purchase of property. Buyers should make themselves aware of the process of payment of Tax deducted, time when the tax should be deducted from payments, how to issue TDS Certificate(Form 16B) etc.

These provisions for TDS on purchase of property were introduced in the year 2013 on 1st June. A new section "Section 194 IA" of the Income Tax Act containing the provisions for TDS on property purchase was inserted in the Act.

Here we have tried to explain the provisions and procedures for TDS on property purchase by buyers. TDS is required to be deducted if the value of property is Rs. 50 lacs or more.

Who is required to deduct tax?

Any individual buying a property of Rs. 50 lacs or more must deduct TDS on payments made (in lumpsum or in installment) for purchasing the property. A buyer should deduct TDS @ 1% on payments made for a property where purchase price is Rs. 50 lacs or more.

When to deduct tax?

Tax should be deducted at the time of making payment of installment or the whole of purchase consideration as the case may be. If any advance payment is done for the purchase of property, tax should be deducted at the time of advance payment.

For example if you are going to make payment of an installment of Rs. 10,00,000 on 25th April 2014, tax of Rs. 10,000 shall be deducted the same day ie. 25th April 2014 and you should pay the seller Rs. 9,90,000 (net of TDS)

Time limit to deposit Tax deducted:

Tax deducted(TDS) from payments made to seller shall be deposited to the goverment treasury within 30 days from the end of the month of deduction. We can also say that Tax should be deducted on the day of payment itself and must be deposited within 30 days of the end of the month of payment.

For example: if Rs. 10,000 tax is deducted on 25th April 2016, same shall be deposited with the government account till 30th May 2016.

How to deposit Tax so deducted on property purchase?

click here for Step by step guide on how to pay TDS on Property Purchase

Tax shall be deposited to the government treasury by filling a challan cum statement Form 26QB online, availble at TIN-nsdl  website. Payment of TDS on purchase of property is to be made online by availing any one of the following options:
  • online using your net banking account or 
  • by filling the Form 26QB and selecting the option e-tax payment on subsequent date. Now you should take the print out of the acknowledgement slip, and visit any of the authorized banks for payment of TDS. Bank will make the e-payment of tax and provide you the challan of tax payment.
Make sure to fill challan cum statement in Form 26QB correctly. However a facility of online correction/rectification of  any error/mistake is introduced by log-in to TRACES but it is overall a complicated process. 

Facility for verification of status of TDS deposit is also available at online services of TIN-nsdl.

How to issue TDS Certificate?

TDS Certificate(Form 16B) is to be issued by the deductor of tax ie. buyer of the property for the TDS. After few days of depositing TDS to the government account by filling in Form 26QB, deductor can download the TDS Certificate(Form 16B) from the website Deductor first needs to register on the website and then he can dowload Form 16B.

The buyer and seller both can also view the details of TDS in their 26AS. Details of tax deduction in 26AS are generally
available from the 3rd-4th day of deposit of tax to government account.

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Some Quick links:
How to deposit TDS on Property Purchase
How to pay demand of TDS on Property Purchase
What is TDS?
26AS/Tax Credit Statement
Avoid TDS by Form 15G and Form 15H

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