Introduction :– From 1st June, 2013, the purchase of immovable property (other than rural agricultural land) is required to deduct tax at source as per provisions of section 194IA of the Income Tax Act, 1961.
However this section applicable only when sale consideration of the immovable property more than 50 Lacs.
This provision introduced by The Finance Minister to improve the reporting of such transactions and prevents the circulation of black money in Real Estate Market.
TDS on transactions of immovable property is to be deducted by the purchaser of immovable property at the rate of 1%. If the seller does not furnish his PAN, then the rate of TDS would be 20%.
TDS is required to deduct by the purchaser at the time of payment or at the time of credit of account, whichever is earlier. Such TDS would be deducted from the consideration being paid to seller and the tax so deducted needs to be deposited with the government.
TDS deducted by the buyer at the time of making the payment to the seller has to be deposited within a period of 7 days from the end of the month in which deduction has been made. Such payment is to be done in Form 26QB.
According the provision of Section – 203A , any person deducting TDS shall also apply for a TAN U/s 203A. This TAN is mandatory required to be quoted at the time of deducting any TDS, at the time of filling return and at the time deposit of TDS with the Govt. Without holding TAN any person not able to deducts TDS.
However Section 194IA (3) remove such hardship. Which state that a person deducting TDS on property is not mandatory required to quote TAN.
According to Sec-194IA TDS is to be deducted at the time of payment. The date of transfer is not relevant. It is not required to be deducted at the time of transfer but is required to be deducted at the time of payment.
So even if advance payment is being made TDS would be required to be deducted. In case the payment is being made in installments to the seller, then TDS would be deducted at the time of paying each installment.
In case where more than one buyer or seller and individual purchase price of each buyer is less than 50 lacs, but the aggregate value of transaction exceed Rs 50 Lacs, then Sec-194 IA would be applicable and TDS on such property required to be deducted and deposit with the Govt. before Due date.
Provision will also apply even when property is financed through a bank loan. Buyer will have to ensure that he himself or bank deducts tax before disbursing the loan to the seller.
1) TDS is required to be deducted even in the case where the capital gains is exempt U/s 54.
2) Provision of Sec-203A will not apply.
3) TDS on Immovable property deducted only if transaction is above Rs. 50 Lacs.
4) On TDS is required in case of transfer of Agriculture land.
5) The TDS Certificate shall be issued in Form 16B within 15 days from the due date of deposit.
6) Provision will also apply in case when part of the total payment made before 1st June, 2013 and remaining part is disbursed after 1st June, 2013.
7) TDS needs to be deducted even in case of advance payment.
8) The provision will also apply even in case where buyer bought an under construction property prior to the provision coming into effect but he has to make the balance payment after 1st June, 2013.
( Author is a CA Student and can be reached at E-Mail-: [email protected])
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