• Jun
  • 25
  • 2013

TDS on Transfer of Immovable Property u/s.194-IA of Income-tax Act, 1961

Dr. Suresh Surana

Dr Suresh Surana, Mumbai based Chartered AccountantBackground:

With a view to prevent undervaluation and under-reporting of transactions in the real estate sector and also to collect tax at the earliest point of time, vide the Finance Act, 2013, a new section 194-IA has been inserted with effect from 1 June, 2013 to introduce TDS at the rate of 1% on the value of transfer of immovable property where the consideration is Rs. 50 Lacs or more.  

Salient features of Section 194-IA:

  • The obligation to deduct TDS is cast on all Buyers, whether resident or non-resident, and includes individual, firm, company, etc.
  • The Seller should be a resident.
  • The quantum of consideration should be Rs. 50 Lacs or more.
  • Tax shall be deducted at the rate of 1%.
  • Tax is to be deducted either at the time of making payment or crediting of any sum as consideration for transfer of immovable property, whichever is earlier.
  • Buyer is not required to obtain a Tax Deduction Account Number (TAN).
  • The term ‘immovable property’ means any land (other than agriculture land) or any building or part of building.
  • The term ‘agriculture land’ means  agriculture land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2 of the Income Tax Act,1961(‘the IT Act’).

Procedural Aspects:

Recently, the Central Board of Direct Taxes (‘CBDT’) has issued a Notification No.39 of 2013 dated 31 May 2013 wherein Challan-cum-Statement for payment of TDS, time limit for deposit of TDS, Form for issuance of TDS certificate etc. have been provided.

1. Procedure for Payment of TDS :

Buyer of the property has to furnish information regarding the transaction online in Form 26QB on the TIN website. After furnishing of details of the transaction deductor (i.e. Buyer) can either make the payment online immediately or make the payment subsequently through e-tax payment option (net banking account) or by visiting any of the authorized Bank branches.

2. Time for  depositing of TDS :

The Tax deducted by the buyer has to be deposited within a period of 7 days from the end of the month in which deduction is made and shall be accompanied by a challan-cum-statement in Form 26QB

3. Issuance of TDS Certificate to Seller :

Buyer is required to issue a TDS Certificate in Form No.16B to Seller in respect of the taxes deducted and deposited into the Government Account. TDS Certificate should be issued within 15 days from the due date for furnishing the challan cum statement in Form No. 26QB. Form 16B will be available for download from the website of Centralized Processing Cell of TDS (CPC-TDS) www.tdscpc.gov.in. The Seller can verify deposit of taxes deducted by the buyer in his Form 26AS Annual Tax Statement.

Certain Other Aspects:

  • Where Seller fails to furnish his Permanent Account Number (PAN) to the Buyer then tax shall be deducted at the rate of 20% by the buyer.
  • The tax has to be deducted at the rate of 1% even if exemption is claimed by the Seller under Section 54,54EC, 54F, 54GB of the IT Act, on reinvestment of the sale proceeds or the capital gains as the case may be.
  • Interest for failure to deduct Tax: Where the Buyer fails to deduct tax or when short deduction of tax has been done, interest would be levied at the rate of 1% for every month or part of the month on the amount of such tax from date on which tax was deductible to the date on which tax was deducted.
  • Interest for failure to deposit Tax in Government Account after deduction: Where the Buyer has deducted the tax at source but failed to deposit wholly or partly, the tax so deducted in government account, interest shall be levied at the rate of 1.5% for every month or part of the month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

Courtesy: RSM Astute Group (www.astuteconsulting.com)

Kindly email your queries to taxqueries@astuteconsulting.com

Sandeep Kanoi

4 Responses to “TDS on Transfer of Immovable Property u/s.194-IA of Income-tax Act, 1961”

  1. vswami says:

    In one’s honest and impartial perception, nay frank and forthright view, this is one more of the several ‘run of the mill’ kind of write-ups thus far published. It would have been useful to the readers had an attempt been made by the learned Doctor at adding value by covering certain areas remaining uncovered. So as to providing the most needed and urgently called-for clues or guidance to the readers on some of the worrisome aspects on which the provision is prima facie very much lacking in clarity.

    Topping them all is the grave doubt on as to why the provision , in its present terms, must be considered to have application to, hence warrant to be complied with, in cases where the transfer is of ‘unit’ of a building comprising “Flats” or “Apartments”; which, based on genuine reasons , backed up by sound logic, is, as could be stressed, not to be rightly regarded as covered by the extant wording, – “part of building”. In the comments posted elsewhere on this website sincere efforts have been made to underline/drive home the point why there arises such a grave but reasonable doubt crying for an eminent answer and useful guidance to the concerned tax payers who choose to abide by the rules as far as feasible; provided, of course, they are clear-cut and do not suffer from any such glaring lacuna or loophole as brought to the fore.

    Even the Revenue , as has never been known to be otherwise, appears to have thus far preferred to lie low and remain mute, thereby creating an impression that all is well with the new provision; and that there is no lacuna(e) or loophole to be plugged in, on the mentioned aspect. So much so, none, be it the tax paying community or advising professionals are no wiser but obliged to continue in a ‘trishanku’ like situation.

    (Left un-edited; as, in any case, the comments are mainly addressed to those who have the expertise and competence , also the mind and time to painstakingly examine, in-depth, the focussed area of controversy)

  2. CA Ashish Kedia says:

    Dear Sir,
    After so much hype over the issue I feel people are aware of the issue and procedure. Would have appreciated if you could have delved into issues in the subject matter considering your expertise in Direct Taxes. There are many practical issues like:

    - Whether TDS is to be deducted on amount including VAT, service tax, registration fee, stamp duty, etc?

     - Whether in case of payment in installments to the builders for under construction properties, TDS is to be deducted on entire agreement value initially or as per date of accrual of each installment

    - Whether booking amount/ token money would attract TDS?

    Thanking you in advance for your clarifications.

  3. B.Chakrapani says:

    Read. Thanks.

  4. Harshad says:

    Reg.: TDS Challan-cum-Form No.16A. TDS is tedious but may be friendly by way of introducing TDS Challan-cumForm No 16A for 194A etc. to avoid many problem.This challan is very usefull to the I T Department as well as the deductor. BENEFITS 1. No separate issue of Form No 16A by the TDS deductor by downloading the Form No 16A from website. That Govt. shall make arrangement that all the details of this challan are automatically appeared in NSDL”s 26AS. That Govt. has already make arrangment for 194-IA deductor .2. That all the information required for 26Q are already appeared in this challan hence there is no requirement of Filling Form No 26Q & preperation of Form No 27A. 3. TDS deductor will save charges of upload fees, fees of Authorised representative etc. 4. No difficulties in respect of getting credit of TDS. 5. That due to software or other mistake TDS details are not appeared in 26AS & therefore TDS Officers issued thousands of Notices in respect of TDS dpayments. This challan serve all the issues. 6. Huge workload of Income-tax Officer(TDS),Deductor & Deductee will be reduce by above challan because there will be no mis-matching 7. Green Initiative. Less consumption of paper.

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