Form 26QB - All You Need to Know about TDS on Purchase of Immovable Property

Introduction

Buying immovable property in India comes with huge financial and legal responsibilities. A key compliance requirement is the deduction of Tax Deducted at Source (TDS) under Section 194-IA of the Income Tax Act. This provision mandates that 1% TDS be deducted by the buyer (transferee) if the sale consideration or stamp duty value of the property is Rs. 50 lakhs or more, and the amount must be deposited using Form 26QB. TDS is applicable on the higher of sale consideration or stamp duty value, as clarified by the Finance Act, 2024.

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Applicability of TDS on Sale of Property

When the Seller is a Resident

• Section 194-IA, introduced by the Finance Act 2013 (effective 01.06.2013), applies to the transfer of immovable property (excluding agricultural land) if the consideration or stamp duty value is Rs. 50 lakhs or more.
• TDS Rate: 1% of the higher of the sale consideration or stamp duty value.
• Form 26QB: Used to deposit the deducted TDS.
• Form 16B: The buyer must issue this TDS certificate to the seller within 15 days of the due date of Form 26QB filing.
• TAN Not Required: Buyers need not obtain a TAN; PAN is sufficient under Section 194-IA.

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When the Seller is a Non-Resident

• Governed by Section 195, not Section 194-IA.
• TDS depends on the nature of capital gain:
  • Long-Term Capital Gains (LTCG): 12.5% (plus surcharge and cess) as per Budget 2024.
  • Short-Term Capital Gains (STCG): Taxed at slab rates, up to 30% (plus surcharge and cess).
• TAN Required
  : Buyers must obtain a TAN to deduct and deposit TDS under Section 195.
• Form 27Q: Quarterly TDS return required for such transactions.
• Form 16A: Issued as the TDS certificate.
• Lower TDS Certificate (Form 13): The seller can apply to the Assessing Officer for a lower or nil TDS rate.
• Due Dates for Form 27Q:

Quarter Ending	Due Date
30th June	31st July
30th September	31st October
31st December	31st January
31st March	31st May

Note: Buyers must verify the residential status of the seller. Incorrectly treating an NRI seller as a resident can lead to under-deduction and future tax liabilities.

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Step-by-Step Procedure for Filing Form 26QB

1. Visit the e-Filing Portal: Income Tax Portal
   
2. Navigate to the Tax Payment Module
3. Go to
   ‘e-File’ > ‘e-Pay Tax’ > ‘New Payment’
4. Select ‘26QB (TDS on Sale of Property)’
   
   
5. Enter Required Details
6. Residential status, PAN, and contact info of buyer and seller
7. Property address
8. Sale amount and TDS details
   
   
9. Select a Payment Method
10. Net Banking
11. Debit Card
12. RTGS/NEFT
13. Payment Gateway
14. Pay at Bank Counter
    
    
15. Submit and Pay: A Challan Counterfoil with a Challan Identification Number (CIN)
    is generated after successful payment. This serves as proof.

Note: Form 26QB can also be accessed via the TIN-NSDL website, though the e-Filing portal is more widely used.

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Downloading Form 16B (TDS Certificate)

After at least 5 days of TDS payment:

1. Visit www.tdscpc.gov.in (TRACES portal)
2. Log in using the buyer's PAN
3. Go to Downloads > Form 16B (For Buyer)
4. Enter Assessment Year, Seller’s PAN, and Acknowledgment Number
5. Submit the request and download the file via HTTP download

Note: Form 16B must be issued to the seller within 15 days from the due date of Form 26QB filing.

Legal Framework: Section 194-IA (As Amended for AY 2025–26)

Scope and Conditions

• Applies to immovable property (other than agricultural land)
• TDS must be deducted at the earlier of:
  • Credit to the seller’s account
  • Actual payment
• Effective from 01.10.2024, for multiple buyers/sellers, the aggregate transaction value is considered
• Rate: 1% of the higher of the sale consideration or the stamp duty value
• No TAN required

Definition of Terms

• Immovable Property: Land (excluding agricultural land), or building/part thereof
• Consideration: Includes club membership, parking, maintenance, water, or electricity fees, etc.
• Agricultural Land: Exempt unless situated within:

Population Range	Distance from Municipality
10,000–1,00,000	Within 2 kms
1,00,000–10,00,000	Within 6 kms
Over 10,00,000	Within 8 kms

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TDS Compliance Essentials

• Who Deducts and Who Receives
• Payer: Buyer (transferee)
• Payee: Seller (resident under 194-IA)
• Time of Deductions: At the earlier of payment or credit
• Consequences of Not Furnishing PANL Section 206AA mandates: TDS @ 20% if PAN is not furnished or is invalid
• Deposit Deadline and Filing: TDS must be deposited to the Central Government within 30 days from the end of the month of deduction, along with Form 26QB. Deposit must be made electronically
• Issuance of TDS Certificate: Form 16B must be generated and issued within 15 days from the Form 26QB due date
• Multiple Buyer-Seller Transactions: A Separate Form 26QB must be filed for each buyer-seller combination
• Corrections to Form 26QB: Can be made through the TRACES portal, including PAN errors, property details, or TDS amounts

Penalties for Non-Compliance

Issue	Penalty/Interest
Late Filing (Form 26QB)	Rs. 200/day (u/s 234E), capped at TDS amount
Non-Deduction of TDS	Interest @ 1% per month
Non-Deposit of TDS	Interest @ 1.5% per month
Non-Filing of Return	Penalty up to Rs. 1 lakh (u/s 271H)

TDS Refunds and Credit for Sellers

• Sellers can claim TDS credit in their Income Tax Return (ITR)
• Reflected in Form 26AS
• If excess TDS has been deducted, the seller can claim a refund

Conclusion

TDS compliance during the purchase of immovable property is not just a legal requirement but a safeguard against future tax disputes. Buyers must understand and fulfill their obligations under Section 194-IA or Section 195, depending on the seller’s residential status.

Buyers must:

• Deduct and deposit TDS timely using Form 26QB (resident) or Form 27Q (non-resident)
• Issue the appropriate TDS certificate (Form 16B or 16A)
• Ensure that the seller’s residential status is correctly verified
• Avoid penalties by adhering to deadlines and documentation procedures

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