Understanding tax obligations, particularly Tax Deducted at Source (TDS), is essential for navigating the complexities of real estate transactions in India. Understanding how to pay TDS on property is necessary for a smooth transfer and to prevent significant fines if you buy or sell real estate in 2025.
Both buyers and sellers are impacted by the more stringent compliance requirements of recent changes to TDS regulations. Keep reading to learn the most recent TDS laws, detailed payment instructions, and recommended practices for handling TDS in real estate sales.
Understanding TDS on Property Sale
To understand the TDS on the sale of property, it is necessary to learn about its meaning and application.
What is TDS on Property?
TDS on the sale of the property is a tax deducted by the buyer when purchasing immovable property (excluding agricultural land) above a specified value. Mandated under Section 194-IA of the Income Tax Act, this provision ensures that sellers report capital gains and helps the government track high-value transactions.
When is TDS Applicable?
TDS is applicable in the following circumstances:
- The property’s sale consideration or stamp duty value exceeds ₹50 lakh (from April 1, 2025, TDS is deducted on the higher of the sale value or stamp duty value).
- Both residential and commercial properties are covered.
- In joint ownership, the aggregate consideration is considered for TDS applicability, even if individual shares are below ₹50 lakh.
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Step-by-Step Guide: How to Pay TDS on Property
The preparation before paying TDS and the step-by-step guide for TDS payment are explained below:
Pre-Payment Preparations
Before you pay TDS on the sale of the property, ensure you have the following:
- PAN details of both buyer and seller (PAN must be Aadhaar-linked).
- Property sale agreement and valuation certificates.
- Bank account with online payment facility.
- Access to the Income Tax e-filing portal.
Online TDS Payment Process
Follow these steps to pay TDS online for property transactions:
- Visit the TIN NSDL website and select “Challan 26QB”.
- Enter transaction details such as buyer and seller PAN, property details, sale consideration, and TDS amount.
- Verify details and click “Proceed.”
- Choose a payment method, such as net banking or debit card.
- After completing the payment, the TDS amount will be electronically deducted from your bank account.
- Save the acknowledgement receipt that contains a unique CIN and payment details.
- Download Form 16B after payment, register on the TRACES portal, and download Form 16B to provide to the seller (must be given within 15 days of TDS payment).
Offline TDS Payment Methods
You can visit an authorized bank branch with a filled Form 26QB and the required documents if you prefer offline payment. Then, pay at the counter and collect the stamped challan as proof.
TDS Rates and Calculations for 2025
The current rates and TDS calculation process are necessary to ensure error-free TDS payment.
Current TDS Rates
The standard TDS rate for resident sellers is 1% of the sale consideration or stamp duty value, whichever is higher. However, if the seller’s PAN is not provided or not Aadhaar-linked, the TDS rate increases to 20% under Section 206AA.
For NRIs, the TDS rates are significantly higher and depend on whether the gains are long-term or short-term, as well as the total value of the transaction.
Here is a tabular representation of the TDS rate on property in 2025:
|
Seller Type |
Property Value | TDS Rate (2025) |
|
Resident (Individual) |
≥ ₹50 lakh | 1% |
| NRI (LTCG, >2 years) | < ₹50 lakh |
12.5% + 4% cess |
|
NRI (LTCG, >2 years) |
₹50L-1Cr/1Cr-2Cr/>2Cr | 14.3%-17.81% (incl. surcharge/cess) |
|
NRI (STCG, <2 years) |
Any |
As per the IT slab |
| Seller w/o PAN | Any |
20% |
How to Calculate TDS Amount?
To calculate the TDS amount on a property sale, the buyer must deduct 1% of the higher value between the sale consideration (agreement value) and the stamp duty valuation, as per Section 194-IA of the Income Tax Act.
For example, if the agreement value is ₹70 lakh and the stamp duty value is ₹75 lakh, TDS is calculated as 1% of ₹75 lakh, resulting in a TDS of ₹75,000. This ensures that TDS is always deducted on the greater of the two values, preventing underreporting. If the seller’s PAN is not provided, the TDS rate increases to 20%.
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TDS Certificate and Compliance
Here’s why a TDS certificate is essential for property sellers and buyers:
Form 16B – TDS Certificate
After depositing TDS, the buyer must provide the seller with Form 16B, proof of TDS deduction. This certificate can be downloaded from the TRACES portal after the payment has been processed. It must be issued to the seller within 15 days of TDS payment.
TDS Return Filing
Requirements for TDS return filing:
- Form 26QB: The buyer must file Form 26QB online within 30 days of deducting TDS.
- Details Required: PAN of buyer and seller, property details, payment amount, and TDS amount.
- Penalty for Delay: Late filing can attract a penalty of ₹200 per day (up to the TDS amount) and further penalties for non-compliance.
Common Scenarios and Special Cases
The TDS calculation may differ in some exceptional cases or scenarios.
Exemptions from TDS
- Agricultural Land: TDS is not applicable to purchasing agricultural land, provided it is used solely for agricultural purposes.
- Property Value Below ₹50 Lakh: No TDS is required if the sale consideration and stamp duty value are below ₹50 Lakh.
- Seller’s Income Below Taxable Limit: TDS must still be deducted if the property value exceeds the threshold; the seller can claim a refund when filing their tax return.
TDS on Purchase of Joint Property
TDS applicability in the case of joint ownership:
- TDS applies if the total transaction value exceeds ₹50 lakh, even if individual shares are below the threshold.
- Each buyer must deduct and deposit TDS on their share and file a separate Form 26QB.
Builder Transactions
TDS applies to under-construction and ready-to-move properties if the value exceeds ₹50 lakh.
TDS must be deducted from each installment paid to the builder, not just the lump sum amount.
Penalties and Consequences of Non-Compliance
Not paying TDS on time can attract the following penalties:
Late Payment Penalties
- Interest: 1% per month for late payment of TDS.
- Penalty: Up to ₹1 lakh for non-compliance or incorrect filing.
- Impact: Non-compliance can delay property registration and create legal complications.
Legal Implications
- For Buyers: Failure to deduct or deposit TDS can result in penalties and issues with property registration.
- For Sellers: TDS credit may not reflect in their tax records, affecting tax returns and refunds.
- Dispute Resolution: Both parties should maintain proper documentation and evidence of TDS compliance.
Final Thoughts
In 2025, understanding how to pay TDS on property is crucial for anyone involved in real estate transactions in India. Compliance with TDS rules ensures a smooth transfer of ownership, avoids legal pitfalls, and protects both buyers and sellers from penalties.
By following the step-by-step process, keeping accurate records, and leveraging digital tools, you can confidently navigate the complexities of TDS on the sale of property.
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FAQs
- If the agreement value is ₹49 lakh but the stamp duty value is ₹52 lakh, does TDS still apply?
Yes. From April 1, 2025, TDS is triggered if either the sale consideration or the stamp duty value exceeds ₹50 lakh. In this case, since the stamp duty value exceeds the threshold, the buyer must deduct TDS of ₹52 lakh.
- Can a buyer claim a refund if TDS was wrongly deducted on a property valued below ₹50 lakh?
Yes. If TDS was mistakenly deducted when neither the agreement value nor the stamp duty value crossed ₹50 lakh, the seller can claim a refund while filing their ITR. The buyer cannot get a refund, as the TDS amount is credited to the seller’s PAN.
- What happens if a property is under construction and paid for in installments? When should TDS be deducted?
TDS must be deducted at the time of each installment payment, not just at registration or handover. The buyer needs to file Form 26QB separately for each installment, even if the total property value exceeds ₹50 lakh in aggregate.
