Form 26QB - TDS Payment on Purchase/Sale of Property

Section 194-IA of the Income Tax Act, 1961 mandates that when an individual purchases immovable property that is worth more than ₹50 lakhs, then they will have to deduct TDS before paying the seller.

Immovable property includes a house or commercial property, a plot or unconstructed land, etc., except agricultural land. By filling out the TDS form 26QB the amount is paid to the government. One can fill out form 26QB online in less than 30 days from the end of the month for which the deduction for TDS was initiated.

To elaborate with an example, consider that the transaction was initiated on 14th April 2020, and then the TDS will have to be paid to the government by 31st May 2020.

However, the TDS on sale of property - 26QB form is only applicable if an immovable property was purchased after 1st June 2013. If formalities about the property had been completed prior to this date, the filing of TDS is not necessary as per the provisions of the ITA.

Now that we understand the 26QB TDS return meaning, let’s explore some of its key features.

According to Section 194-IA, the buyer is expected to deduct TDS at the rate of 1% of the total sale amount when completing the transaction

• The 26QB TDS rate does not apply for transactions involving agricultural land. The concerned land is not considered agricultural property if the following conditions are true:

• If the land has more than 10,000 people living in the area and it falls under the jurisdiction of Cantonment or Municipality jurisdiction

• If the area falls within the distance of:

• For transactions that are valued at less than ₹50 lakhs, the TDS on sale of property 26QB form is not applicable. It is when transactions exceed this limit that the TDS is deducted from the entire amount. For example, if the property is valued at ₹54 lakhs then the TDS will have to be paid on ₹54 lakhs and not just the excess, i.e. ₹4 lakhs.

• If the payment is made in instalments, then the TDS is deducted proportionately on every instalment.

• There is no need for the buyer to procure a Tax Deduction Account Number (TAN) for depositing and deducting the TDS. However, the buyer and the seller must both be in possession of a PAN if the TDS form 26QB deduction applies to them.

• The TDS must be deposited along with form 26QB within 30 days from the end of the month when the TDS was deducted

• If multiple buyers and sellers are involved in the transaction of an immovable property, then the deductor will be expected to submit multiple form 26QB.

• After deducting and depositing the TDS, the buyer must give the TDS certificate to the seller within 15 days of the transaction, which verifies that the tax has been deducted and deposited to the government.

• Finally, the buyer will have to procure Form 16B and give it to the seller.

It is important to note that the responsible individuals will be penalised if TDS has not been deducted, issuing Form 16B, or not filing Form 26Q. The applicable penalties for the 26QB TDS rate are as follows;

Here is the process for filling out and making form 26QB payment online:**

Step 1: Visit the official e-filing website of the Income Tax Department of the Government of India

Step 2: Scroll down and navigate the TDS on Property (Form 26QB)

Step 3: You will be expected to fill out details such as:**

• Information regarding the taxpayer

• Address

• Property Details and

• Payment information

• Some of the details will be auto-filled on the homepage, such as the taxpayer information:**

• Financial year

• Year of assessment

• Name and Status of the transferee

• Name and Status of the transferor

Step 4: Duly fill out the accurate form to proceed following which a confirmation screen will appear with options to "Print Form 26QB" and "Submit to the bank." You will also receive an acknowledgement number that should be saved for future use.

Step 5: To print the form, click on the ‘Print’ option and to make payment via Internet banking, click on "Submit to the bank" for 26QB payment online

Step 6: Once the payment has been successful, you will receive a challan counterfoil containing CIN, payment details, and bank details. This is proof of payment completion.

Diving into the complexities of tax compliance particularly with regard to Form 26QB requires both attention to detail and adhering to the timelines outlined by the government. As one learns to prioritise financial planning, investments, and property transactions, it is important to identify the connection between tax obligations and financial transactions.

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