Effective 1^st June 2013, section-194IA was introduced in the income tax act, 1961, by finance bill, 2013 in order to have a reporting mechanism of transactions in the real estate sector and also to collect taxes at the earliest point of time.

In case of transfer of immovable property, the buyer of the property, whether built up or under construction, is responsible to deduct TDS on the amount to be paid to the resident seller of property. However, this provision shall not be applicable if the transaction value is less than Rs. 50 Lakhs.

Applicability of TDS section 194IA

• Any person buying any property is required to deduct TDS, if the value of the transaction is Rs 50 lakhs or more.
• Even if the seller is liable for a lower amount of capital gain tax, TDS shall be deducted as per the applicable rate.
• TDS to be deducted on total amount and not only on amount exceeding Rs. 50 Lakhs i.e. In case value of the property Rs. 75 Lakhs, then TDS should be deducted on the total amount of Rs. 75 Lakhs and not on Rs. 25 Lakhs (Rs. 75 Lakh – Rs. 50 Lakh)
• TDS has to be deducted irrespective of the amount of capital gain earned by the seller.
• This section covers residential property, commercial property, as well as land. However, transactions pertaining to the purchase of agricultural land, are not covered under this provision.
• Buyer or Purchaser of the property is not required to procure Tax Deduction Account Number (TAN).

Applicability of TDS deduction in case of multiple buyers

• In case there is more than one buyer, then each buyer shall deduct TDS from his share of sale consideration.
• For the purpose of eligibility of TDS provisions, total value of the property shall be considered.
• For example, if the value of property is Rs. 50 lakhs and it is being purchased by 2 buyers then in such case even though TDS is not applicable individually. However, since the total value of property is Rupees 50 Lakhs, TDS is required to be deducted by both the buyers.

Applicability of TDS deduction in case of multiple sellers

• In case the buyer is purchasing property from multiple sellers, then TDS shall be deducted from the sale consideration being paid to all the sellers.
• For the purpose of eligibility of TDS provisions, total value of the property shall be considered.
• For example, if the value of property is Rs. 50 lakhs and it is being held by 2 sellers then in such case even though TDS is not applicable on individual transaction, since the total value of property is Rupees 50 Lakhs, TDS is required to be deducted from the sale consideration being paid to both the transferors.

What is the rate of TDS on Sale of property to be deducted?

Calculation of TDS amount

TDS is to be calculated on the sale consideration payable to be seller. It doesn’t include VAT/GST and service tax. Thus for example, let’s assume that the sale consideration is Rupees 50 Lakhs, GST is Rs. 6 Lakhs @12%. In such case the amount payable is 56,00,000/- (50,00,000 + 6,00,000). However, TDS will be 0.75% of 50 Lakhs, i.e. Rs. 37,500/-.

Responsibility of the Purchaser of the Immovable Property

• Step-1 – To Deduct TDS
  • (i) Collect the permanent Account Number (PAN) of the seller and verify the same with the Original PAN card.
  • (ii) To deduct TDS @1% from the payment made to the seller, if PAN of the seller is available.
  • (iii) In case the seller does not furnish his PAN, TDS will have to be deducted at 20%.
• Step-2 - Online filling of challan cum statement of TDS at www.tin.nsdl.com
  • The TDS on immovable property has to be paid using Form 26QB challan cum statement within 30 days from the end of the month in which TDS is deducted. The online Form 26QB is available on the TIN website for furnishing information regarding TDS on property.
• Step-3 – Downloading and Issuance of TDS Certificate
  • (i) Download TDS certificate from TRACES www.tdscpc.gov.in in form 26QB for issuing to the seller.

Responsibility of the Seller of the Immovable Property

• (i) Provide his PAN to the Purchaser for furnishing information regarding TDS to the Income Tax Department.
• (ii) Verify deposit of taxes deducted by the Purchaser in his Form 26AS Annual Tax Statement.

How will transactions of joint parties (more than one buyer/seller) be filed in Form 26QB?

Online statement cum challan Form/ Form 26QB is to be filled in by each buyer for unique buyer-seller combination for their respective share. E.g.

• In case of one buyer and two sellers, two forms have to be filled in and
• For two buyers and two seller, four forms have to be filled in for respective property shares.

Time of TDS deduction

• If the purchaser maintain books of accounts, the TDS should be deducted at the time of paying the seller or crediting his account, whichever is earlier.
• If the purchaser do not maintain books of accounts (most individual buyers would come in this category) TDS should be deducted at the time of paying the seller.

Time of TDS deduction where home loan is availed by the buyer

• In case the buyer has taken home loan on the property being purchased, then TDS shall be deducted at the time of payment of sale consideration to the seller and not at the time of payment of EMIs to the financial institution.
•  Further, in case of home loan, payment is directly made by the financial institution to the seller, it is the responsibility of the buyer (and not of the financial institution) that TDS is deducted before the payment is made.

Time of TDS deduction where Sale consideration is in installments

• The transferee has to deduct TDS at the time of payment of sale consideration.
•  If sale consideration is not paid in lump sum and is paid in installments, TDS is to be deducted at the time of payment of each installment.

Due date of TDS deposit to government account

• The buyer needs to deposit the amount within 30 days from the end of the month in which the tax is deducted.
•  The deposit needs to be done electronically using Form 26QB.
•  This form has details such as name, address and permanent account number (PAN) of the buyer and seller.

Due date of Issuance of TDS certificate

• The buyer has to issue TDS certificate in Form 16B to the seller within 15 days from the due date for depositing the tax deducted.

Conclusion

The article covers all important aspects under section 194IA which is useful for all concerned. Happy reading!!!