SRINIVAS RAO, ACA

SRINIVAS RAOGovernment of India has Introduce a new area for collection of Tax at source with effect from 1st June 2013 known as TDS on Transfer of Immovable Property. The intention behind the Introduction of TDS is to put check on Realty Sector and to ensure reporting of sale / purchase of Immovable property which were earlier not reported anywhere or reported at later stage i.e. after the end of the financial year in which actual transaction was taken place.

Since major portion of India’s population still following the Tradition of holding land/ properties as their status symbol and making sale of it only when there is urgent requirement of money. So in this arena, it is important for every individual to understand the implications of this move and how they would actually be impacted when they go to purchase or sale ofan immovable property.

What to be included 

The applicability of the provisions are a significant part of the process and for this purpose it is very clear that the new tax deduction at source will have to be made for immovable property. This will then broadly include land and house property and which is also an area where a lot of investments are taking place.

What to be excluded

The term immovable property by itself ensures that various movable property like vehicles and other assets are excluded from the list. There is one more specific exclusion present in the process and this is that of agricultural land so while other types of land will be included under the definition the agricultural  land would be excluded.

Value on Which TDS applicable

When the transaction value is over 50 lakh TDS shall be applicable on that. So there is a built in provision for the protection of the small individual as they will not be covered in the bracket of 50 lakhs. However another angle to the entire situation is that the prices of properties has risen so much in the last few years that even in smaller cities it is not surprising to find that the value of the property crosses the RS 50 lakh mark.

Responsible for TDS & rate of TDS

The next question that arises in the process is about the responsibility for making the TDS. In this case this has been put squarely on the shoulders of the transferee/ buyer. This means that the person who will get the ownership of the immovable property would have to fulfill the conditions. The person is the buyer who will actually make the necessary payment to the seller and then take the possession of the property. The rate at which the deduction has to be made is important because this is fixed at 1 percent but if there is no submission of the PAN then this could have to be done at 20 percent.

Compliance requirement:

Usually complying with the requirements for the tax deduction at source is very complicated and involves a lot of procedures. This involves getting the tax deduction at source number (TAN) which is like a PAN for those who are actually deducting the tax. The tax that has been deducted has to be deposited with in the specified time and then a return has to be filed.

In this case there is an online form for making the TDS payment. Details required for the form will include the PAN of both the parties, their addresses along with the address of the property and the amount of the tax. In this case there would be a situation wherein the TDS could be a one-time action because there will be people who are not normally covered under these provisions but they have to make the deduction for this purpose. The requirement for TAN has been done away with and even the return filing process has been simplified so this should provide some relief for the individual.

However for people who have never done this before it might seem to be a difficult task and they might require some professional help in completion of the process. Knowing the details and the fine print is important so that there are no mistakes that are made when it is actually completed.

Conclusion

A look at several of the conditions related to this provision will ensure that there is a properway in which the details are considered and this will also help in ensuring that the conditions related to the TDS are met and fulfilled so that there shall not be any issue arise in relation to default at the later stage.

(Author may be contacted on casrinivasrao @ hotmail.com)

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More Under Income Tax

Posted Under

Category : Income Tax (27505)
Type : Articles (17008)
Tags : Section 194IA (43) TDS (1026)

9 responses to “Transfer of Immovable Property & Income Tax – A Critical Analysis”

  1. Aakash Bansal says:

    Respected sir,
    If i am purchasing a property for rupess 54 Lakh and the property is in the name of two persons let say (mr A and mr.B).
    I want to register the property in the name of me and my wife.

    in such a case section 194A applied or not?

    Kindly help

  2. Srini says:

    What could be the recourse for the buyer who deposits the TDS on the immovable property on advance. But before concluding the sale deed the deal gets cancelled. The seller will return only the money which he had got on hand, what will happen to the TDS amount paid by the buyer to the account of seller in Form 26QB.

    On the other hand seller cannot seek for the credit of TDS deposited on his account since no income would have been offered for tax as the deal has not got fructified.

  3. Ravi rajpal says:

    Sir we are purchasing a property of about 60 lac. for that we have made a advance payment of 50%.
    now the seller wants that 1% TDS Should not be deducted from his payment and paid to government.
    he is willing that we should not pay TDS and nor he will pay.
    please help me out what to do
    he is also not allowing us to deduct the amount of TDS from his payment

  4. KOMAL BUDHWANI says:

    Sir i had booked a flat in 2012 the section 194 was not implemented till that time i had paid Rs. 20 laks own funds and 1.2 cr a loan from india bulls without deduction of TDS in 2012 please suggest whether i have to deduct TDS on interest for Balance EMI i am an individual and having tax audit in propriertor concern but i am not debiting interest to any business expenses

  5. CA Sewak Das says:

    Lot of issue is not consider while drafting the said provision:-

    1) In case of loan arrangement will assessee be liable to banker will be liable to deduct the TDS.
    2) How compliance will be done in case of NRI assessee.
    3) Whether transaction value include Service tax and other taxes payable etc

  6. Hari Raheja says:

    The provision of deduction of 1% of the sale price by way of TDS applies only where the Transferor / Seller is a Resident.
    In the case of a Non Resident Seller the provisions of S. 195 apply.

  7. rugram says:

    A useful article. Thanks.
    The author could have also touched upon some FAQs such as what happens when either the buyer or the seller or both, have no PAN nos., format of TDC to be issued, whether surcharge/cess has to be deducted in addition to the tax amount, and the report if any that the buyer has to submit to the I-T Dept. (the ReturnFiling process) for the tax deducted at source.
    Thank you.

  8. sonee says:

    The moot point is abour NRI sellers and tds issues.

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