Simplifying Tax for C.A's and Taxpayers
TDS on payment for immovable properties-Section 194-IA of the Income Tax act, 1961

TDS on payment for immovable properties-Section 194-IA of the Income Tax act, 1961

How much TDS to be deducted, procedure for depositing the same, whether applicable on all immovable properties, which form to be filed for furnishing the details, time limit etc.?

Finance Bill of 2013 w.e.f 01.06.2013 made applicability of TDS (tax deducted at source) on sale of immovable property wherein the purchaser of the property has been casted duty for deducting TDS from the amount to be paid to the seller as consideration for purchase of property and deposit the same to the income tax department.

Synopsis of section 194-IA of the Income tax act, 1961 and other important points:

  1. Who is liable to deduct TDS and when:
  • Purchaser to deduct TDS @ 1% of sale consideration, if the sale consideration of the immovable property exceeds or is equal to Rs. 50, 00,000 (Rupees Fifty Lakhs).
  1. Amount on which TDS to be deducted:
  • Deduction of TDS to be made on total value of consideration.
  1. If payment made to NRI:
  • No TDS to be deducted in case payment is made to non-resident for purchase of immovable property. In such a cases section 195 comes in purview.
  1. If transaction is for agricultural land:
  • Section applies to all immovable properties but does not apply to transaction of sale/purchase of rural agricultural land. Hence no need to deduct TDS on purchase of agricultural land situated in rural area even if sale consideration exceeds or is equal to Rs.50,00,000/-. However in case of urban agricultural land purchaser is required to deduct TDS, if other conditions as described are applicable.
  1. If transaction is in nature of gift:
  • In case of gift of immovable property no consideration accrues and as such no TDS is required to be deducted even if stamp valuation of the immovable property exceeds or is equal to Rs.50,00,000/-. However section 56 of the Income tax act, 1961 shall be borne in mind for other purposes.
  1. What is cut-off date:
  • In case agreement for sale of immovable property was made prior to 01.06.2013 and payment is made in installments or in any other mode as and when demanded no TDS is to be deducted irrespective of value of sale consideration as agreement was executed prior to 01.06.2013, the date on which section come into force.
  1. If payment is in lumpsum or installment:
  • Deduction of TDS shall be made at the time of credit of such sum to the account of the seller or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. Therefore in case some advance payment is made for the purchase of immovable property whose total sale consideration is equal to or  likely to exceeds Rs.50,00,000/-, TDS shall be deducted even on advance payment.
  1. In case capital gain has been exempted u/s 54:
  • TDS be deducted even if seller has availed exemption with respect to capital gain if arising on sale of immovable property u/s 54 of the Income Tax act, 1961.
  1. Whether TAN no. to be applied for like in case for TDs on salary, interest, contract, rent, etc:.
  • Provisions of section 203A of the income tax act for obtaining tax account number (TAN) are not applicable on the purchaser. Hence no need to apply for TAN number.
  1. What in case of compulsory acquisition:
  • Not applicable on the payment of compensation or enhanced compensation or consideration or enhanced consideration on account of compulsory acquisition of immovable property under any law for the time being in force. These transactions for the purpose of TDS are dealt separately u/s 194LA.
  1. Whether TDS in such a cases property wise or parties wise:
  • In case sellers are joint owners or sellers are having ratio of 60:40,etc, even in such cases TDS shall be deducted if total value of sale consideration of the immovable property is equal to or exceeds Rs.50,00,000/-. Similarly in case purchasers are joint owner or having different ratio, TDS shall be deducted if total value of sale consideration of the immovable property is equal to or  exceeds Rs.50,00,000/-.  Thus TDS applicability is based on property wise sale consideration not on number or ratios of buyers and sellers.
  1. What is the time limit for deposit of TDS and which form/challan to be used:
  • As per notification no.39 dated 31.05.2013, TDS deducted in such a cases has to be deposited by purchaser of the property within a period of 7 days from the end of the month of deduction and shall be accompanied by a challan-cum-statement in Form 26QB.
  • All details regarding transaction and TDS in such a cases are required to be furnished by the purchaser online in form 26QB through tin-nsdl.com site. This form serves the purpose of challan as well as statement. TDS can be deposited through net banking or through physical mode at designated banks. In case physical mode for payment is chosen than print out of acknowledgment for submission of form 26QB be submitted to bank and payment be made and counterfoil be obtained from the bank. Following banks are authorized:
  1. Allahabad Bank
  2. Andhra Bank
  3. Axis Bank
  4. Bank of Baroda
  5. Bank of India
  6. Bank of Maharashtra
  7. Canara Bank
  8. Central Bank of India
  9. Corporation Bank
  10. Dena Bank
  11. HDFC Bank
  12. ICICI Bank
  13. IDBI Bank
  14. Indian Bank
  15. Indian Overseas Bank
  16. Jammu & Kashmir Bank
  17. Oriental Bank of Commerce
  18. Punjab and Sind Bank
  19. Punjab National Bank
  20. State Bank of Bikaner & Jaipur
  21. State Bank of Hyderabad
  22. State Bank of India
  23. State Bank of Mysore
  24. State Bank of Patiala
  25. State Bank of Travancore
  26. Syndicate Bank
  27. UCO Bank
  28. Union Bank of India
  29. United Bank of India
  30. Vijaya Bank
  31. Whether any TDS certificate to be issued to seller:
  • After depositing the TDS, purchaser has to issue form 16B within 15 days from the date of submission of form 26QB generated and downloaded online to the seller of the property by logging on site  tdscpc.gov.in.
  1. What about delay in depositing of TDS and submission of form 26QB:
  • Interest and late fees in case failing to deposit and submit the form 26QB in time has to be deposited along with TDS under respective head.

Action Points to be borne in mind by the purchaser of the immovable property:

  1. Deduct TDS @ 1% from the sale consideration of the immovable property
  1. Take the permanent Account Number (PAN) of the seller and verify the same with the original PAN card.
  1. PAN of both seller as well as purchaser has to be furnished mandatorily in the online Form for furnishing information regarding the sale transaction.
  1. There is no mechanism to correct errors committed online while furnishing the form. Therefore it is suggested that details be filled carefully while quoting the PAN or other details in the online Form. Otherwise for seeking any type of correction Income tax department has to be contacted.

Action Points to be borne in mind by the seller of the immovable property:

  1. Provide PAN number to the purchaser for furnishing information by purchaser regarding TDS to the Income Tax Department.
  1. Insist him to provide form 16B for deposition of TDS.

By viewing Form 26AS Annual Tax Statement, check the correctness of amount of deposit of taxes deducted by the Purchaser.

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