When to deduct TDS on Sale of Property?

On the sale of property a TDS of 1% needs to be deducted, this was introduced in the 2013-14 Budget to put a check on underhanded property deals. In effect from June 2013, the regulation mandates that on sale of property exceeding Rs. 50 lakhs in India, a tax of 1% has to be deducted on the total sale consideration before making the payment to the seller.

The buyer must then deposit this 1% TDS to the Government. PAN of both the buyer and seller must be compulsorily specified while filling out Form 26QB to ensure that sellers don’t avoid taxes on the capital gains they make.

This rule does not apply on the sale of agricultural land.

What are Form 26QB and Form 16B?

Form 26QB is a return cum challan for payment of TDS to the government. Form 16B is a TDS certificate issued by the buyer to the seller for TDS deducted on the sale of property.

What is the procedure to deposit TDS?

• First, calculate 1% TDS on the total sale consideration. For a property getting sold for Rs. 70 lakhs, 1% of this is Rs. 70,000 and so the seller would receive Rs. 69,30,000 after tax.
• Make the payment online on Form 26QB. A challan is generated. Note that this has to be done within 7 days from the end of the month in which TDS is deducted.
• The payment is reflected on the seller’s Form 26AS under the head Part F within 7 days.
• The buyer is then required to furnish a TDS certificate called Form 16B to the seller. This can be downloaded from the TRACES website.
  • For this, register on the TRACES website with your PAN and challan number.
  • Click on “Application for request of Form 16B” from the header.

How is this shown on the seller’s income tax return?

Capital gains made from the sale of property along with the TDS information present in Form 26AS will have to report in the seller’s income tax return.