Buyer’s Dilemma – TDS on transfer of immovable property
The Finance Bill, 2013 introduced a new section 194-IA in Income tax Act. As per this section, purchaser of an immovable property worth over Rs. 50 lakhs is required to pay withholding tax at the rate of 1% from the consideration payable to a resident transferor. If seller does not provide his/ her PAN then TDS will be deducted @20%.This section is effective from 1st June, 2013.
Exceptions – No TDS u/s 194 IA required to be deducted where consideration paid or payable for the transfer of an immovable property is less than Rs. 50,00,000/-.
– In case the payments are made to a Non-Resident transferor, withholding TDS will be 20%.
Why it is Important for you to know?
In today’s world, most of us would have booked properties with various developers under different schemes such as:-
1. Construction linked Plan – CLP
2. Possession Linked Plan – PLP
3. Subvention scheme
4. Down Payment
In any of the above mentioned scheme, if there is any part payment have to made by you, then also one is liable to deduct the TDS at the applicable rate and submit the same within the stipulated time of 7 days from end of the month in which TDS was deducted.
Even if you opted for Subvention scheme, where the builder is liable to pay interest, the individual is liable to deduct TDS and deposit the same to the government.
What if you deduct and doesn’t deposit?
The IT department will issue a demand note for the penalty. Attaching a real demand note, incase you think how would they know?
The demand note in this case, is due to delay in deduction of the TDS deducted which attracted a 1% interest per month and has caused Rs.200/- per day penalty.
If one deducts the TDS and doesn’t deposit, then interest would be 1.5% per month of the amount along with penalty.
Most of the time we caught unaware of the rules and these IT department demand note act as a Wake – up call.
-It is mandatory to provide PAN of both transferor (Seller) and transferee (Buyer)
-Complete address of transferor and transferee is to be given
-About property, complete address, consideration value, date of agreement and whether payment made in lump sum or instalment is also to be provided in the online form.
2. Electronic payment by deductor not having Net- Banking facility:
-Since Section 194-IA transactions will be one off and deductor may not have net-banking facility, for this situation an alternate has been provided:
-The deductor has to fill the information online and then opt for e-tax payment on subsequent date option.
-On completing the form, an acknowledgement will be generated.
-The deductor can then visit a bank branch for payment and provide the acknowledgment number to bank.
-Bank will use TIN web site to retrieve payment information based on the acknowledgement number and then proceed to make electronic payment.
3. Deposit the tax deducted:
-Tax has to be deposited within 7 days from the end of the month in which TDS was deducted.
-TDS will be deposited by way of a challan- cum- statement in “Form 26QB”.
-Tax is to be deposited electronically into RBI/ SBI or any authorised bank.
-TDS Certificate in respect deduction under section 194-IA will be issued by deductor in Form No 16B.
-Form 16B has to be issued within 15 days from the due date of depositing tax.
-Form 16B will have to be downloaded from income tax web portal (TRACES website).
-Deductee will get the credit of tax like any other prepaid taxes.
-Purchaser would not be required to obtain TAN.
Important points to be considered
-In case of a property transaction involving more than one seller, TDS will be deducted in respect of amount paid to each seller and their respective PAN will be quoted while making payment through Form 26QB.
-Property may be residential or commercial or industrial.
-In case of a property transaction involving more than one seller, value of consideration for property as a whole will be considered for TDS purposes instead of consideration value given to each seller separately.
-If the seller of property is a builder or a flat owner making a subsequent sale then still the TDS provisions will apply. It means TDS has to be deducted irrespective of who the seller is. However, where the seller is a non- resident, these provisions would not apply.
-Applicability of TDS is only to the actual consideration specified in the transfer documents, and is not on the basis of a notional fair market value, such as a stamp valuation, even though such valuation may be higher.
-Total consideration would include all the payments except stamp duty or registration fees or transfer fees and service tax borne by the purchaser.
-Where the purchaser gets the property financed through some bank or finance company then purchaser will have to request the bank or financing company to pay the amount net of TDS to the seller.
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