TDS on Sale of Certain Immovable Property

TDS on Sale of Immovable Property

The Indian finance minister Mr. P Chidambram has introduced a new section 194IA in Income Tax Act 1961 which is applicable w.e.f 1^st of June, 2013. Section 194IA dealt with TDS on transfer of certain immovable property other than agricultural land.
As per section 194IA “any person, being a transferee responsible for paying any sum to a resident transferor by way of consideration for transfer of immovable property (other than agricultural land), shall deduct TDS at the time of credit of such amount to the account or at time of payment through cash, cheque, DD or any other mode, equal to the 1% of such sum as income tax thereon.”

Here few vital features are given as follows:

  1.   No TDS shall be made, where the consideration for the transfer of an immovable property is less than Rs 50 lacs.

  2.   As per this section TDS will be applicable if consideration of an immovable property exceeds Rs 50 lacs, means multiple buyers or multiple sellers will not make difference even if their individual share in consideration doesn’t exceed Rs 50 lacs.

  3.   Transferor shall be resident of India for TDS under this section.

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

  5.   Immovable property could be commercial or residential.

  6.   Payment made through book entries shall also be covered under the term “any other mode of payment”

  7.   In case of exchange of immovable assets both seller and buyer will be liable for TDS on each other.

  8.   Transfer of immovable asset on account of Gift will not be covered under this section because gift is transfer without consideration.

  9.   If case of property financed through loan from any bank or any financial institution then in that case a written instruction shall be furnished to bank or institution to remit amount to seller after deducting TDS on the total payment made and deposit Tax amount to government directly.

 10.   Both Seller and buyer shall have PAN for filing TDS challan form 26QB because name field will be prefilled after filling PAN in given field, TDS challan can’t be filled until both parties PAN is available.

 11.   Buyer need not to obtain TAN for TDS on consideration, although PAN is mandatory.

 12.   If buyer fails to deduct TDS he will have to pay interest and penalty as per the provision of the act. In case if seller has paid tax then buyer is liable to pay penalty and interest on delayed period only.

 13.   TDS shall be deposited up to 7^th day of next month in which amount has been credited or payment made whichever is earlier.

 14.   Buyer has to give TDS Certificate with in 15 days in form 16B.