Section 194IA, introduced by the Finance Act, 2013, of the Income Tax Act, 1961 contains provisions relating to TDS on transfer of certain immovable property. This provision is applicable on transfer of immovable property of Rs. 50 lacs or more.
It requires TDS to be deducted at 1% of the price being paid by the purchaser of an immovable property, irrespective of quantum of capital gains. If the seller does not have/provide a PAN, the rate of TDS would be 20%.
Salient feature of Section 194 IA are as under –
1. Provision of section 194IA are applicable in case of transfer of any immovable property of Rs. 50 Lacs or more;
2. Rate of TDS to be deducted is 1%;
3. Person purchasing the immovable property is required to deduct TDS;
4. Provisions of section 194IA are not applicable in case of sale of rural agricultural land;
5. Provisions of section 203A i.e. tax deduction account number shall not apply to the person required to deduct tax under section 194IA.
Usually, tax has to deducted, in case where books of accounts are maintained, either at the time of crediting account or payment of consideration, whichever is earlier. In case books of accounts are not maintained, tax has to be deducted at the time of paying the seller.
Such TDS would be deducted irrespective of who the seller is i.e. whether a builder or a flat owner making a sale. However, the provisions of this section does not apply on Non-Resident.
For the purposes of computation of the limit of Rs. 50 lacs, the total consideration, whether paid before 01 June 2013 or subsequently, would have to be considered.
Fortunately, the purchaser deducting such TDS is not required to comply with the cumbersome TDS procedural requirements applicable to other TDS deductors, such as obtaining a Tax Deduction Account Number, filing a TDS return, issuing a TDS certificate, etc.
The purchaser of the immovable property, who has deducted TDS, is required to deposit the amount within a period of 7 days from the end of the month in which tax has been deducted. The deposit of TDS has to be done online in form 26QB.
(Compiled by ‘Prateek Manocha’ A Student of Institute of Chartered Accountants of India)
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