FAQs on TDS on purchase of immovable property

Written By – PKC Desk, Edited By – Abhinand, Reviewed By – Aakash

List of FAQs on TDS on purchase of immovable property

Reason for Introduction of TDS on Immovable Property?

TDS or tax deducted at source refers to the process of collecting income tax at source by the government of India. It is a kind of spot deduction of tax from the original source of income. The transactions of Immovable property are usually undervalued and under-reported. Almost half of the transactions don’t even carry the PAN card of any of the parties concerned. With a view to improving the reporting of such transactions and the taxation of capital gains, in budget 2013 the concept of TDS on immovable property has been introduced.

Who is responsible to deduct the TDS on sale of Immovable Property?

The buyer of immovable property has to deduct the TDS from the consideration payable to the seller and deposit the same in Government treasury.

What is the rate of tax and threshold limit for deduction of TDS?

The buyer of the immovable property needs to deduct the TDS at the rate of 1% on the consideration payable to seller provided the consideration payable should exceed Rs.50 lacs.

Should the TDS be deducted on the amount exceeding Rs.50 lakhs?

No, if the sale consideration exceeds Rs.50 lacs then TDS needs to be deducted on the entire amount. For example, the sale consideration of the immovable property is Rs. 80 lacs, in such case TDS needs to be deducted @ 1% on Rs. 80 lacs (i.e., 80000/-) not on Rs.30 lacs. @ 1% on Rs. 80 lacs (i.e., 80000/-) not on Rs.30 lacs.

However, TDS is not required to be deducted if the sale consideration does not exceed Rs. 50 lacs.

What is the time limit for depositing the TDS to the credit of the Central Government?

TDS shall be paid within a period of 30 days from the end of the month in which deduction is made. For example, if the TDS was deducted on 15^th June then it shall be deposited to the credit of the central government by 30^th Jul.

I am Buyer, do I require to procure TAN to report the TDS on sale of Property?

Buyer or Purchaser of the property is not required to procure Tax Deduction Account Number (TAN). The Buyer is required to quote his or her PAN and sellers PAN.

What if I don’t have the PAN of the seller, is it Mandatory?

PAN of the seller is mandatory. The same may be acquired from the Seller before effecting the transaction. If the seller does not furnish his/her PAN or furnishes invalid PAN to the buyer, then the buyer shall deduct the TDS @ 20%.

How to file TDS returns without having a TAN number?

Government has introduced form 26QB which is “challan cum return” wherein the details of PAN number of buyer & seller, details of the property, sale consideration etc will be required. No requirement of TAN while filing form 26QB.

Whether any certificate needs to be given to the deductee? If so, what is the time limit?

Yes, the buyer shall furnish the certificate of TDS deducted in form 16B to the deductee (Seller) within 15 days from the due date of filing of form 26QB.

Whether TDS @ 1% needs to be deducted on sale of all immovable properties?

No. In case of sale of rural agricultural land, then TDS is not required to be deducted.

When will the land be treated as Rural Agricultural land?

The land should not be situated in

In any area within jurisdiction of municipality or cantonment board which has a population of not less than 10,000
In any area within below given distance measured aerially

*Population of the municipality*	*Distance from Municipal limit or Cantonment Board*
More than 10,000 but does not exceed 1,00,000	Within 2 Kms
More than 1,00,000 but does not exceed 10,00,000	Within 6 kms
Exceeding 10,00,000	Within 8 kms

Whether any charges will be included in sale consideration while deducting TDS?

Yes, “the consideration for transfer of any immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property.

Whether 1% of TDS will be applicable in case of sale of immovable property by NRI?

No, Buyer should deduct TDS @ 1% on sale consideration on account of transfer of immovable property only in case the consideration is payable to resident transferor (Resident seller). If the buyer purchases an immovable property from an NRI, then TDS shall be deducted under different provisions of Income Tax act. (Normally TDS would vary from 20% to 30% + surcharge and cess if any).