As per the provisions under Section 194-IA of Income Tax Act, 1961, when an individual buys immovable property worth more than Rs. 50 lakh, he or she has to deduct TDS when paying the seller. The TDS amount is paid to the government by filing Form 26QB in under 30 days from the month’s end for which TDS was deduction was initiated.

For example, if a transaction was initiated on June 15th, 2020, the TDS amount must be paid to the government by July 31st, 2020. However, it is essential to note this TDS deduction and payment is only applicable if an immovable property was purchased after June 1st, 2013. If formalities involving the property were completed before the date, filing TDS is not required as per the Income Tax Act provisions. 

Requirements Associated with Form 26QB

Section 194-IA of Income Tax Act 1961 set a few rules related to buying and selling immovable property such as land, building, and more. They are as follows:

  • A buyer must deduct TDS at the rate of 1% from the sale value of immovable property at the time of transaction.
  • A buyer does not have to deduct TDS payment on purchase of property if its cost is below Rs. 50 lakh. 
  • A buyer doesn’t need to acquire a Tax Deduction Account Number (TAN) to collect and pay TDS to the government. However, PAN details of both buyer and seller are necessary if TDS is deducted using Form 26QB.
  • Multiple Form 26QBs will be required in case there are numerous buyers and sellers.
  • If the property’s payment is made in instalments, TDS is deducted in instalments on a pro-rata basis.
  • Post deduction and payment of TDS, a buyer has to issue a Form 16B (TDS certificate) to the seller within 15 days. TDS has to be paid equally at similar rates by all buyers in case of more than one buyer.
  • A buyer does not have to deduct TDS if the immovable property is considered as agricultural land.

Please note that the concerned land will not be considered as agricultural if these two conditions are true:

  • The land with a population of more than 10,000 is situated in an area that comes under the jurisdiction of Cantonment or Municipality jurisdiction 
  • The land is situated in any area within the distance given below:
Distance from Cantonment Board or Municipality Population
Up to 2 kms Minimum of 10,000 but not exceeding 1,00,000
Up to 6 kms  Minimum1,00,000 but exceeding 10,00,000
Up to 8 kms  Above 10,00,000

Penalty Charges Associated with Form 26QB

The table given below gives the penalty charges associated with Form 26QB:

Penalty Charges Reasons
1% interest is levied on the amount that is not deducted by the buyer for TDS If TDS is deducted
1% interest is imposed per month on the non-remitted TDS amount. If TDS is deducted but not paid to the government
As per the provisions of Section 234E, taxpayers have to incur penalty charges of Rs. 200 per day in case of late filing of TDS. In case of delay in filing TDS
Penalty ranging from Rs. 10,000 to Rs. 1 lakh as per Section 271H can be charged. However, no penalty charges will apply if TDS is paid along with interest, fees and the required statement within the specific time frame.  Under Section 271H of Income Tax Act 1961, penalty charges can only be charged as per this section if a required statement is not submitted within the specified time. 

How to File Form 26QB Online?

Buyers must follow the steps given below to pay TDS online:

Step 1: Visit the official website of TIN NSDL.

Step 2: Navigate to TDS on sale of property and click on “Online Form to File TDS”.

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Step 3: Choose the challan as per applicability.  

Step 4: Enter all details as required. Users should be keeping these documents handy:

  • PAN details of buyer and seller
  • Address and contact details of buyer and seller
  • Property documents 
  • The total amount paid and the amount of tax deposited 

Step 5: After entering all the required information, submit the form and click on confirm after a confirmation screen appears. An acknowledgement number is displayed on the screen. It is recommended that one saves it for future reference.

Step 6: After confirmation, click on the Print Form 26QB option to take a printout. 

Step 7: Click on “Submit to the bank” option to make the payment via net banking platform which is available for a list of authorised banks. 

Step 8: Once the payment is complete, a challan is generated, which consists of CIN, bank name and other payment details.

Here are some authorised banks through which one can make payment of TDS –

  • Andhra Bank 
  • IDBI Bank
  • Allahabad Bank
  • Indian Bank
  • ICICI Bank 
  • HDFC Bank
  • Bank of Baroda
  • Bank of India 
  • Axis Bank 
  • Jammu & Kashmir Bank 
  • Canara Bank
  • Dena Bank 
  • Indian Overseas Bank
  • State Bank of India
  • HDFC Bank

As noted above, after payment of TDS, a buyer has to issue Form 16B to the seller within 15 days in lieu of TDS amount paid to the government. 

How to Download Form 16B?

Form 16B can be downloaded 5 days after filing Form 26QB by following the steps mentioned below:

Step 1: Visit the official TRACES website. 

Step 2: Register and log in to the TRACES portal using PAN details.

Step 3: Enter all information about the transaction involving the property.

Step 4: Enter Acknowledgment Number, Assessment Year and PAN of the seller. Then click on proceed. 

Step 5: Click on “Submit Request”.

Step 6: Once the download request is submitted, note down the download request number.

Step 7: Click on the “Requested Downloads” and search with the download request number to find Form 16B.

Individuals must deduct and pay TDS using Form 26QB within the stipulated time period to avoid penalty charges. Apart from this, one should also become familiar with the tax benefits associated with the buying and selling of immovable property to optimise the process.