Section 194IA-Deduction of Tax at Source from payment of transfer of immovable property
Section 194IA-Deduction of Tax at Source from payment of transfer of immovable property
In light of the recent surge in property demand and the corresponding increase in stamp duty value among other factors, it's becoming increasingly common for property transactions to exceed the Rs. 50 Lakh threshold. Given this trend, it's crucial to pay close attention to several key aspects associated with such transactions. One of the most significant considerations in this context is the Tax Deducted at Source (TDS) under Section 194-IA of the Income Tax Act. This regulation has several noteworthy features, which are detailed below for a comprehensive understanding.
Provisions of Section 194IA under Income Tax Act, 1961, states that when a person purchases immovable property and amount exceeds a certain threshold limit, TDS will be applicable.
Let’s Elaborate: -
Scope
This provision is applicable to any person being Buyer of any kind of immovable property including land (other than agricultural land), building or part of building. Seller should also be a resident. For the purpose of deduction of tax at source, TAN (Tax Deduction and Collection Account Number) is not mandatory for a buyer of the property.
If the seller is not resident then, these provisions are not applicable. For Non-Resident sellers, provisions of Section 195 will be applicable.
Threshold limit
The threshold limit is Rs.50 Lakh. Provision will be applicable when the Consideration or Stamp duty value, exceeds Rs. 50 Lakh.
Rate of TDS
Tax shall be deducted at the rate of 1% applicable on whole sum of consideration (include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property)
FORM 26QB
The buyer, as the deductor, is responsible for deducting the tax at source.The buyer is responsible to pay such Tax to Central Government within a period of thirty days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in FORM 26QB. 26QB must be filed online but payment modes can be online or offline.
Rate of TDS if PAN is not furnished
If the deductee (seller) does not furnish a PAN, the deductor is required to deduct tax at source at the rate of 20 per cent.
Special Cases
a. Joint Sellers: -
In cases where, there are multiple sellers owning the property, TDS liability will be divided as per their share in such property. Form 26QB is to be filed by each Buyer-seller combination. E.g. In case of 2 sellers and 1 buyer, 2 Form 26QB are required to be filed.
b. Joint Buyers: -
When there is more than 1 buyer, each buyer will deduct the tax. Each buyer is required to deduct tax on basis of his share in property. Form 26QB is to be filed by each Buyer-seller combination. E.g. In case of 2 buyers and 1 seller, 2 Form 26QB are required to be filed.
c. Multiple Buyers and Sellers: -
When there are multiple buyers and sellers, each joint seller is liable for TDS and each buyer is required to deduct tax, as per their shares in property. Form 26QB is to be filed by each Buyer-seller combination. E.g. In case of 2 Buyers and 2 sellers, 4 Form 26QB are required to be filed.
Penalty
If a person fails to file the TDS statement within 30 days from the end of the month in which Tax is deducted will be liable to Late Fees as per Section 234E at Rs.200 per day from which default happens and which is restricted to the amount of TDS.
Interest for failure/delay of deduction shall be levied at @1% for a month or part of month on amount of such Tax, and @1.5% for every month or part of month for delay in remittance of such Tax to Government.
Key considerations while filling Form 26QBs
i. Make sure 1% TDS is deducted at the end of the last instalment/last adhoc payment from whole sale consideration in case of part payments in construction linked/adhoc plans.
ii. TDS certificate in Form 16B should be given by the Buyer to the seller within 15 days from the due date of filing of Form 26QB.
iii. If there is a late payment, make sure to close demand or to revise Form 26QB to avoid future notices.
iv. Reference of TDS payment details in Sale Deed should be given at the time of execution of Sale Deed.
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