TDS on Sale of Immovable Property: Section 194IA of Income Tax Act Overview

Have you recently purchased a property, like a building or land? Then, you need to know what Section 194IA is. The section mandates you to submit a 1% TDS within 30 days of the transaction and submit it to the government. Read this blog and find out more about it. 

Quick Synopsis

• The buyer deducts the TDS if the property value exceeds ₹50 lakh.
• As a buyer, you must also get the Form 16B and submit it to the seller after filing the TDS using Form 26QB.
• You can file the TDS completely online using the online portal of the Income Tax Department of India. 

An Overview of Section 194IA and Its Conditions

Whether you are a buyer or a seller of an immovable property in India, you must be aware of Section 194IA of the Income Tax of India. 

Under this section, if you are a buyer of a property, you must deduct 1% as a Tax Deducted at Source (TDS) and deposit it with the government using Form 26QB. 

If you are a seller of a property, you can claim this deducted amount as a tax credit while filing your IT returns. Here are its details that apply to Section 194IA TDS:

• For a property sale value of more than ₹50 lakh, the buyer deducts a 1% TDS.
• No additional cess or surcharges apply under this section 
• While submitting the TDS using Form 26QB, PAN card details of both the buyer and seller need to be submitted. If the seller's PAN is not available, the TDS is 20%.

Exceptions Allowed Under Section 194IA of the Income Tax

Depending on the types of immovable properties or the intent of sale, TDS applicability varies:

• If you are a buyer of agricultural land, the section 194IA applicability does not work here, as it is not a capital asset. Hence, there is no requirement for a TDS deduction. 
• Under section 194LA, if the government acquires your property (non-agricultural) for development, architectural projects, etc., it deducts a 10% TDS if the total sale value exceeds ₹2,50,000.

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Documents You Need to File TDS Under Section 194IA

Make a note of these documents as they are crucial for a correct TDS deduction under Section 194IA:

• Registered Agreement of Sale: To accurately determine the TDS amount, you must keep a certified copy of the sale agreement as a buyer. 
• Details of the Property: Suppose you are buying or selling in or from one of the cities or any other region in India, you must keep an accurate record of the property location, size, age, etc. 
• PAN and Aadhaar Details: While deducting TDS under Section 194IA, you must submit the accurate PAN and Aadhaar Card details of both you (buyer) and the seller. 

Steps to Pay TDS on Property Purchase Using Form 26QB

Using the following easy 4-step guide, you can easily fill out and submit Form 26QB and download Form 16B:

Step 1: Head to the e-filing portal and, after logging in, click on e-pay tax under the e-File menu. 

Step 2: Choose the ‘New payment’ option, choose ‘26QB - TDS on Property’ and fill out the buyer and seller details. 

Step 3: Enter your property details, make your TDS payment using net banking or any other option. After a successful payment, you will receive Challan 280 as a receipt.

Step 4: Log in to the TRACES Portal and head to the ‘Downloads’ tab. Choose Form 16B and fill out the PAN details of the seller along with the acknowledgement number of Form 26QB.

Step 5: After completing the steps above, download the file once it is available and save it on your device. Access it using your (buyer’s) date of birth and provide it to the seller.

Reporting Mechanism of TDS Payment Under Section 194IA in ITR

• You do not need to report deducted TDS separately. Just verify it in Form 26AS, and if there is an excess TDS deduction, you can claim a refund while filing your ITR. 
• If you are a seller, you must report your property sale under "Capital Gains" in your ITR. The TDS deducted by your buyer will show in your Form 26AS, which you can claim as a tax credit. Keep Form 16B ready as proof to avoid any issues during assessment.

Final Word

Section 194IA mandates the buyer of an immovable property in India to deduct TDS and submit it to the government. As a buyer, you must submit Form 26QB online and obtain Form 16B to submit it to your property seller. 

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