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

Background:

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.

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