It is a most important and critical section under the Income Tax Act,1961. Below are some of the major considerations to be taken into account at the time of purchase of the property.
- This section is applicable for purchase of an Immovable property and not for any other capital assets.
- It is not applicable for purchase of a Rural Agriculture Land.
- Rate of TDS is 1%. Presently due to Covid-19, rate of TDS deduction is reduced to 0.75% from 14.05.2020 to 31.03.2021. From 01.04.2021, TDS rate would be 1%.
- Threshold limit for TDS deduction is INR 50 lacs or more.
- Seller/Transferor/Payee should be RESIDENT in India. In case seller is NRI, section 195 would be applicable.
- Buyer should file Form 26QB for deposit of TDS deducted.
What is Form 26QB?
Form 26QB is a statement cum challan for deposit of TDS u/s 194-IA of Income Tax Act,1961. Generally, a person who is liable to deduct and deposit TDS has to obtain TAN (i.e. Tax Deduction Account Number). To reduce the hardships for Individual buyers for obtaining TAN just for single transaction or non-recurring transactions, Form 26QB was introduced. Below is the list of information required in filing of FORM 26QB.
- PAN of seller
- Address of Seller
- PAN of buyer
- Address of buyer
- Address of property
- Total value of the Consideration
- Date of Payment/credit of consideration
- Date of Agreement/Booking
- Date of Tax Deduction
- Rate of TDS
- TDS Amount
- Interest
- Fee
As per the section, TDS has to be deducted on payment or credit of the consideration whichever is earlier. If the payment is done in installments then TDS should be deducted on each installment. File Form 26QB within 30 days from the end of the month in which payment/credit has been made otherwise Late Fees of Rs. 200 per day will be levied. The amount of Late fees shall not exceed the amount of TDS. Interest @1.50% per month will also be levied.
After filing of Form 26QB, Form 16B (i.e. TDS certificate) is issued by buyer to seller which have details of PAN of buyer, seller, value of property, challan details etc.
The entries of purchase and sale is reflected in Form 26AS of both buyer and seller. Both should match the entries in Form 26AS before filing of ITR.
Also Read: Income Tax on F&O and Intraday Trading
Also Read: Tax on NRI for sale of Immovable Property in India
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