File TDS on Property in 2024 With Ease

Want to Know how to pay TDS on property purchases with ease without going into too many technicalities? Here, we will provide you with the details of how you can pay TDS on property like an expert.

Before moving on, you need to know some basic provisions that will help you understand the guidelines set by the government so that no one will fool you.

If you buy or sell a property in India for Rs. 50,00,000 or more, and the seller is a resident, you need to deduct TDS (Tax Deducted at Source). This applies even if you are a non-resident buyer. TDS calculation includes not just the property cost but also additional fees like club membership and parking. If the property's value is less than Rs. 50,00,000, no TDS is required.

Suppose someone (whether they live in India or not) buys a property in India, excluding certain agricultural land, and the property value is 50 lakhs or more. In that case, they must deduct TDS (Tax Deducted at Source). This TDS is 1% of the property's price or the stamp duty value, whichever is higher.

After deducting the TDS amount, they give the remaining 99% of the property price to the person selling it. This is a way to ensure the government gets a part of the tax upfront when dealing with properties of 50 lacs or above.

If you're a buyer and purchasing a property valued equal to 50 lacs or more than 50 lacs, the tds of 1 percent will be deducted from your side before making the payment to the seller of the total Value of the property. You are entitled to pay that 1 percent to the government on behalf of the seller on the seller's PAN number. 

Suppose, for instance, you are a buyer and have purchased a property valued at 50 lacs; now, according to the guidelines set by the government, a person who is purchasing a property equal to 50 lacs or more than 50 lacs will have to deduct the TDS of 1 percent on behalf of the seller, that will be paid to the goverment on seller's PAN Number, for example: 1 percent of 50 lacs would be 50 thousand, now you will pay that fifty thousand on seller's behalf to the govt on his PAN, and the rest of the amount which is 49 lacs and 50 thousand to the seller, now the seller can file income tax return to get that amount from the government, it is his task and your work has been completed.

Now, I will discuss some scenarios so you can easily understand the filing of TDS on the sale of property.
 

When Both Buyer and Seller are living in India

Suppose the buyer and seller are both Indian residents. If the property's Value equals or exceeds 50 lacs, the buyer will deduct 1 percent tds on the property on the seller's behalf and be paid to the government. The rest of the amount will be paid to the seller; for example, 1 percent of 50 lacs is 50 thousand, which the buyer will deduct, and 49 lakhs 50 thousand will be paid to the seller.
 

When Buyer is Non Resident but Seller is Resident

The same provision will be followed if the buyer is a nonresident and the seller is a resident. For example, if the buyer, MR. Sumit is living in the USA, and the seller, MR. Ayush is living in india. The same 1 percent TDS will be imposed as above. However, the seller has to be an Indian resident to fall under this provision.

When Buyer is Resident but Seller is Nonresident

If Mr. Ayush from Australia sells his flat in Noida to Mr. Sumit in Faridabad for 60,00,000, the rule Sec 194-IA doesn't apply. Why? Because this rule is for sellers who are residents of India. However, another rule, Sec 195, still applies for TDS (Tax Deducted at Source). It means Mr.Sumit, the buyer, must deduct a small percentage as tax upfront and pay the rest to Mr. Ayush, a nonresident. So, even though one rule doesn't apply, there's still a process to ensure taxes are handled correctly in the property transaction.
 

If More Than 2 Sellers are Involved in a Transaction

If Ms. Harshita and Mr. Ayush from Delhi sell their house to Mr. Sumit In Faridabad for 60,00,000, they each get 30,00,000; individually, it's less than 50,00,000. However, the combined amount exceeds 50,00,000. So, even though each seller gets less than 50,00,000, the buyer, Mr.Sumit, still needs to deduct 1% TDS from the amount paid to each seller. In this case, it would be 30,000 (1% of 30,00,000) for each seller. This ensures the government gets its share when the total transaction value is significant, even if individual shares are below the threshold.

If the Stamp duty Value exceeds the sale value paid by the buyer

When Mr. Ayush from Delhi sells his house to Mr.Sumit in Faridabad for 49,00,000, it seems below the 50,00,000 threshold. However, the government looks at the stamp duty value, which is 54,00,000. Since this stamp duty value is higher and exceeds 50,00,000, Mr.Sumit, the buyer, needs to deduct TDS (Tax Deducted at Source) at a rate of 1%. In this case, that's 54,000 (1% of 54,00,000). It's a way to ensure the government gets its share when the property value, as per stamp duty, is substantial, even if the selling price is less.

Steps to File the TDS on the Sale of Property

1. TDS Deduction (u/s 194 IA):
     The buyer deducts TDS (Tax Deducted at Source) under section 194 IA when you buy property.

2. Filing Form 26QB:
    Buyer needs to fill Form 26QB on income tax portal, providing:
     - PAN details of both buyer and seller.
     - Residential addresses of buyer, seller, and the property.
     - Details of the money paid for the property.
  
3. Separate Forms for Multiple Sellers:
     If there are multiple sellers, the buyer files separate Form 26QB for each, specifying the money paid to each.

4. Payment and Challan:
     After filling in the details, the buyer pays, and a challan (receipt) is generated.

5. Form 16-B (TDS Certificate):
   - The buyer must issue the seller Form 16-B (TDS certificate).
   - This certificate can be downloaded from the Traces portal using the buyer's credentials.

Note:- In this article, I have simplified the steps to filing the TDS on a property, which will help you when you file your TDS on the property sale.