Demystifying Form 26QB: Understanding the Basics of Property TDS in India

The Income Tax Act of 1961 has established several crucial regulations for both the sale and purchase of real estate. These rules encompass Section 194-IA, which applies to these real estate transactions. In compliance with these regulations, individuals buying property are required to withhold Tax Deducted at Source (TDS) from the payment owed to property sellers, who are often referred to as the deductors.

This obligation becomes mandatory when the transaction value exceeds Rs. 50 lakhs. Additionally, the deductor is obligated to furnish Form-16B to the deductee (the seller). The specific requirements for Form-26QB under Section 194-IA are outlined comprehensively.

Consequently, this article provides a comprehensive overview of everything you need to know about Form 26QB.

Understanding TDS

TDS, or Tax Deducted at Source, is a way the Indian government collects income tax right when you earn money. It is like getting a little chunk of your income taken out automatically. This is done according to the Indian Income Tax Act of 1961. It is managed by the Central Board for Direct Taxes - part of the Indian Revenue Service Department.

TDS is a way of indirectly collecting income tax. And this is applied to several types of income like interest from bonuses, fixed deposits, payments for services, and dividends. And one of the most important ones is that it is even collected when someone buys or sells property. How much TDS is collected actually depends on the type of income you're earning. This can vary from 1% to 30%.

What is FORM 26QB?

The online document accessible on the TIN website, which is used to report information about Tax Deducted at Source (TDS) related to property acquisitions, is referred to as FORM 26QB.

In general, anyone tasked with deducting TDS is required to acquire a Tax Deduction Account Number (TAN). However, in the context of TDS for real estate transactions, the buyer is exempt from obtaining a TAN. Instead, the buyer must furnish specific details, such as the name, address, PAN (Permanent Account Number), mobile number, and email address of both the seller and buyer, within Form 26QB. Additionally, it is essential to include the complete property address, the date of the agreement, the total value of consideration, the payment date, and related particulars.

Buyers should also remember the importance of issuing Form 16B, which is generated through TRACES (TDS Reconciliation Analysis and Correction Enabling System). Failure to file or late filing of Form 26QB may prevent the seller from availing tax credit for the TDS deducted.

When is Form 26QB required to be filed?

Form 26QB must be submitted by the buyer within 30 days after the conclusion of the month in which the tax deduction was executed.

To illustrate, consider the following scenario: Rahul sold a property to Neha, and a sales consideration of ₹ 52 lakhs was disbursed on September 15, 2023. In this case, the Form should be filed on or before October 30, 2023. However, if the form is submitted after the due date, late fees of ₹ 200 per day will be applicable.

What information should be included in Form 26QB?

The following particulars need to be provided:

• PAN of the buyer and seller.
• Complete addresses of the buyer and seller.
• Contact details for both the buyer and seller.
• Property details.
• Amount credited/paid.
• Tax deposit information.

When And What Is the TDS Requirement for Property Sales?

TDS is mandatory when the stamp duty value of the property surpasses the actual selling price. For example, under the recent amendment, a TDS of 1% would be calculated and withheld from a total of 65 Lakhs, resulting in a deduction of 65,000 Rupees.

Let us understand this with an example, if Mr. Raj purchased the property from Mr. Rohan for ₹ 60 lakhs, but the stamp duty value of the property stands at ₹ 65 lakhs, Mr. Raj will receive ₹ 59.35 lakhs after the TDS deduction.

Conclusion

it is crucial for every individual earning income to fulfill their tax obligations to the government. Moreover, taxpayers are required to file income tax returns as per the tax regulations. Also, we hope that this information will offer individuals a clear understanding of the purpose and requirements of Form 26QB, enabling them to navigate property transactions with confidence and accuracy, while ensuring full compliance with tax regulations.