TDS on sale of Immovable property

Posted On: 2014-11-05 23:43:38

Background:

TDS on transfer of immovable property has been inserted with effective from 01-June-2013 in Finance Act 2013 by inserting a new section called 194IA. 

Applicability:

1. Applicable to all the transfers of the Immovable properties expect the transfer of Agricultural Land.

2. Applicable only in case the transferor is a resident.

3. If the Transferor is resident of India, provisions of section 194IA are applicable irrespective of the situation of the property, whether situated in India or outside. But this section as stated above is not applicable if the property in question is Rural Agriculture land as explained above.

4. It is not applicable incase the transfer is covered under the section 194LA (TDS on Payment of compensation on compulsory acquisition of certain immovable property). 

Point of Tax deduction:

Tax should be deducted on:

- At the time of credit of such amount to the account of the transferor i.e. booking in the books; or

- At the time of credit of payment of such sum in cash or by issue of a cheque or draft or by any other mode.

whichever is earlier. 

No TAN required:

There is no requirement of obtaining TAN no as per Sec 203A for person responsible for deducting tax under section 194IA.

What is Immovable Property, Agricultural Land? 

Immovable property means any land (other than agricultural land) or any building or part of a building.

Agricultural Land means any land situated in India but not including land situate

1. in any area which is comprised within the jurisdiction of a municipality or a cantonment board and which has a population  not less than 10 thousand.

2. in any area within the distance, measured aerially,-

- not being more than two kilometres, from the local limits of any municipality or cantonment board and which has a population of more than ten thousand but not exceeding one lakh; or

- not being more than six kilometres, from the local limits of any municipality or cantonment board and which has a population of more than one lakh but not exceeding ten lakh; or

- not being more than eight kilometres, from the local limits of any municipality or cantonment board and which has a population of more than ten lakh.

- CBDT vide its notification no. 39/2013 dated 31st may 2013 has prescribed the rules regarding mode of deduction, deposit and issuance of TDS certificates in respect of deduction made 

Rate of TDS:

Tax should be deducted at the rate of 1% by the purchaser of the property on the value of the consideration received on transfer of immovable property.

If the seller doesn't have a PAN, then Tax needs to be deducted at the rate of 20% as per section 206AA  instead of 1%. 

Threshold limit: 

No TDS is required if the value of the consideration received doesn't exceed Rs.50 lakhs

Time Limit for payment: 

Tax deducted as above needs to be deposited within 7 days of next month (In case of month of March due date is April 30). TDS should be deposited only through online payment. New challan cum statement form framed for payment i.e. 26QB. 

Payment of Tax: 

Tax so deducted should be remitted to the Government through any of the authorized bank using the e-Tax payment option available at NSDL. 

PAN of Seller as well as Purchaser should be mandatorily furnished in the online Form for furnishing information regarding the sale transaction. 

Do not commit any error in quoting the PAN or other details in the online Form as there is no online mechanism for rectification of errors. For the purpose of rectification you are required to contact Income Tax Department. 

Issue of TDS Certificates: 

The purchaser of property who has deducted TDS as per sec 194IA need to issue TDS certificate in Form 16B within 15 days from due date of deposit i.e. by 22nd of next month in which tax has been deducted. 

At present there is no mechanism in place of issue of system generated TDS certificate as we have in case of form 16A and form 16, so you need to issue TDS certificate manually. 

No TDS Return:

 No need to file TDS return separately on quarterly basis as TDS challan cum statement i.e. Form 26QB shall need to use for remitting TDS amount to government which covers all the details as required to be furnished under TDS return. 

Interest for late deduction and late payment of Tax: 

Interest is payable at the rate of 1% for every month of late deduction of tax and at the rate of 1.5% for every month of late payment of tax deducted.

Source : Income Tax Act,1961 and Rules -

Source : TDS On Sale Of Immovable Property