TDS Payment for Purchase of Property in India

In India, when you buy a property, you are required to pay 1% of the sale agreement value as TDS to the government. This is only applicable if the value is above 50 lakhs. Let’s say the property agreement value is 1 crore (100 lakhs). In that case, the TDS to be paid to the government will be 1%, i.e., 1 lakh. So, you will make a payment of 99 lakhs to the seller and 1% to the government in the form of TDS.

The TDS can be paid online by visiting the https://www.tin-nsdl.com/ portal using form 26QB. On completion of online payment processing of TDS ,you will receive an acknowledgement / Challan. You also need Form 16B for each TDS payment made. The Form 16 B will need to be downloaded by you post payment of TDS in a week's time . To generate the Form 16B, you will have to log in to the website https://www.tdscpc.gov.in and register yourself first using the acknowledgement no/challan no of the TDS challan that you have for the payment made. Post which you can download the Form 16 B. You will give a copy of the Form 16QB, Challan, and the form 16B to the seller as proof of payment made.  They can use these Form 16B copies to claim the tax benefits.

According to the Sec 194 IA of the Income Tax Act, the TDS of 1% should be deducted at the time of making the payment for sale consideration. Customers have to deduct 1 % of total due amount (including GST) and pay to the government directly (through bank - Via Online facility or directly by visiting the bank) immediately after making the last payment to the seller, without any further delay. There will be interest implications from the IT dept for the delay in payment of TDS which could be as high as Rs. 200 per day on the TDS amount due. 

The payment of TDS can be made in lump sum or in installments. So, if the sale consideration is 100 lakhs, but you are making part payments such as 10 lakhs at one time and 20 lakhs another time, you need to deduct 1% TDS for each payment. For example, for a payment of 10 lakhs, you will deduct TDS of 10,000, pay 990,000 to the seller and 10,000 as TDS to the government. This needs to be done for each payment.

As the rule states, the 1% TDS payment needs to be made immediately after making the payment to the seller. A problem arises when a part of the payment is coming from a bank in the form of loan. Let’s say that out of 100 lakhs, the bank is providing a loan of 50 lakhs. The bank will not deduct TDS on this amount and will pay the entire 50 lakh amount directly to the seller. The responsibility of paying TDS will be on the buyer and in this case, it is not clear from the Income Tax Act as to when and how this payment should be made. However, the general practice is that if both seller and bank are okay, you can make this payment on the date of registration on which the bank will hand over the loan amount dd to the seller. If either the seller or the bank don’t agree to this and want to see the challan and form 16B of this payment made before proceeding with registration, it is generally okay to make this TDS payment 1 week in advance, so that you will receive the form 16B before the registration date and you can provide a copy of it to the bank and seller. While doing so it is suggested to fill the payment date also as the same date as the TDS payment date.

To summarize our example, for a property of 100 lakhs, you will make a payment of TDS payment of 1 lakh, you will directly pay 49 lakhs directly to the seller, and the bank will pay the loan amount of 50 lakhs directly to the seller.