Purchasing property comes with important tax considerations that buyers should understand. One major aspect is Tax Deducted at Source (TDS) on property purchases, which was introduced in 2013 under Section 194-IA of the Income Tax Act 1961.
This provision requires the deduction of 1% TDS on the purchase price as tax if the property value exceeds Rs. 50 lakhs. The TDS is meant to curb tax evasion in real estate transactions. As such, the buyer must deduct this 1% TDS from the payment to the seller and deposit it with the government.
To submit the deducted TDS, buyers need a payment challan or Form 26QB. This article explains the intricacies of Form 26QB, such as its key provisions, and when and how to file it correctly.
What is Form 26QB?
Section 194-IA of the Income Tax Act mandates the deduction of TDS when purchasing an immovable property exceeding Rs. 50 lakhs. This implies that, before paying the seller, the buyer must deduct 1% of the property value as TDS and remit it to the government.
Form 26QB serves as a payment challan used by the buyer to submit the deducted tax to the seller.
This TDS regulation applies to all immovable property purchases, except for agricultural land, including commercial buildings, residential apartments, and land plots.
However, a land shall not be treated as agricultural land if:
a) It’s situated within the jurisdiction of a Municipality or Cantonment Board with a population of not less than 10,000; or
b) It’s located within a specified distance measured aerially from these areas:
Population of the municipality
Distance from municipal limit or cantonment board
More than 10,000 but does not exceed 1 lakh
Within 2 kms
More than 1,00,000 but does not exceed 10 lakh
Within 6 kms
Exceeding 10 lakh
Within 8 kms
Key provisions of Form 26QB
Section 194-IA of the Income Tax Act 1961 sets rules for buying and selling immovable properties like land and buildings. These include:
1. The buyer must deduct 1% as TDS from the property's sale value during the transaction.
2. If the property costs less than Rs. 50 lakhs, no TDS deduction is required.
3. If this payment is made in instalments, TDS is deductible on each instalment.
4. When making TDS payment, both the buyer and seller must provide their PAN. If not, TDS will be charged at the rate of 20%.
5. After deducting TDS, buyers must send the TDS certificate to the seller. He/she can access this two weeks after depositing TDS via Form 26QB. The buyer also needs to obtain Form 16B and submit it to the seller.
6. If there are multiple buyers or sellers, use separate Form 26QBs for each.
When should Form 26QB be filed?
Form 26QB should be filled out by each buyer separately, based on the specific combination of buyers and sellers for their respective property shares. For instance, if there's one buyer and two sellers, two forms are required; if there are two buyers and two sellers, four forms are needed for their corresponding property shares.
Buyers must complete and submit Form 26QB within 30 days from the end of the month in which the tax deduction occurs. Let's say you buy a property from a friend, and the transaction starts on 15 December 2022. In this case, you must submit the TDS amount by 30 January 2023. If you miss the Form 26QB filing deadline, a late fee of Rs. 200 per day will be imposed.
Step-by-step guide to fill Form 26QB
Before you start filling Form 26QB, make sure you have all the necessary information to complete it. To fill the 26QB form online, follow the steps below:
Step 1: Log in to the e-filing portal at https://www.incometax.gov.in/iec/foportal/.
Step 2: Under 'e-file,' click on 'e-Pay tax.'
Step 3: Click on ‘New Payment.’
Step 4: Select ‘Proceed’ under the ‘26 QB (TDS on Sale of Property)’ field.
Step 5: Complete the form with the necessary details like the seller's residential status, PAN of the seller and buyer, communication details of both parties, property details, and payment and tax details.
After submission, applicants need to choose one of the following modes of payment:
- Net banking
- Debit card
- RTGS/NEFT
- Pay at bank counter
- Payment gateway
Step 6: Select the appropriate payment mode and proceed to make the payment.
Upon successful payment, a challan counterfoil will be displayed, providing proof of the payment made, including the CIN, payment details, and the bank name used for e-payment. This serves as proof that the payment has been made successfully.
How to download Form 26QB?
Follow these steps to access the 26QB form or download it through the income tax portal:
- Visit the TIN government portal.
- Enter the PAN number of the transferee/buyer.
- Enter the PAN number of the transferor/seller.
- Fill in the ACK No.
- Select the Assessment Year.
- Enter the Captcha code.
- Click on proceed.
After completing these steps, you can print Form 26QB.
Important note: The term "ACK No" denotes the Acknowledgment number. You can locate the ACK No. for your submitted Form 26QB in the Form 26AS (Annual Tax Statement) of the Deductor (Buyer) on the TRACES website.
Alternatively, you can use the 'View Acknowledgment' option on the TIN website. To retrieve the Acknowledgment Number, enter the PANs of both the Buyer and Seller, total payment, and specified Assessment Year used during the Form 26QB filing.
Wrapping up
When buying a new property, it's mandatory for purchasers to deduct and submit 1% TDS on the total sale amount within 30 days from the following month. Buyers can simplify this process using Form 26QB on the TIN NSDL website for convenient online tax submission. Failing to complete this within the timeframe may result in penalties.
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15 February 2024
5 mins read
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