Finance Act, 2013 has introduced Sec 194-IA which provides for deduction of tax at source in case of payment of sale consideration of immovable property (other than rural agricultural land) to a resident transferor w.e.f 1st June 2013.
It is the responsibility of the buyer to deduct TDS if the transaction value exceeds Rs. 50 lakh. The buyer is required to deduct TDS @ 1% on the total consideration and deposit the same in the Government treasury.
Properties that are covered
Sec 194-IA covers residential property, commercial property whether built up or under construction, as well as land except agricultural land.
When TDS to be deducted
Sometimes total sale price, which exceeds Rs. 50 lakh in aggregate, may be payable in installments. The TDS in that case must be deducted from each installment no matter how small the installment is.
Due date of deposit of TDS & filing of Return
The TDS, deducted each time while paying the instalment, is to be deposited with the Income tax authority by way of return cum challan (Form 26QB) within 30 days of the month, following the month in which payment is made. Refer CBDT notification no. 30/2016 dated April 29, 2016.
If a taxpayer has made payment of sale consideration in the month of February, then corresponding TDS should be deposited on or before (thirty days) 30th March.
What is FORM 26QB
The online form available on the TIN website for furnishing information regarding TDS on property is termed as FORM 26QB
Details to be furnished in FORM 26QB
Generally, every person who is responsible for deducting TDS has to obtain a TAN (tax deduction account number). However, in case of TDS on immovable property, the buyer does not have to obtain the TAN. The buyer has to provide details like name, address, PAN, mobile number and email id of the seller as well as buyer, in Form 26QB. The complete address of the property, along with the date of agreement, total value of consideration, date of payment, etc. also need to be provided.
Buyers should also remember to issue Form 16B. It is generated from TRACES and the seller may not be able to take tax credit for TDS deducted in case of non-filing or late filing of Form 26QB.
What is FORM 16B
Form 16B is the TDS certificate to be issued by the deductor (Buyer of property) to the deductee (Seller of property) in respect of the taxes deducted and deposited into the Government Account.
Transaction with Joint Parties
Online statement cum challan Form/ Form 26QB is to be filled in by each buyer for unique buyer-seller combination for 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.
Penalty/Interest for non-compliance
Failing to comply with the provision of Sec 194-IA will attract late filing interest as well as penalty under Section 271H of Income Tax Act , 1961 up to Rs 1 lakh (Minimum Rs.10,000/-).
The interest payable under Section 201(A) is 1% per month if tax wasn’t deducted and U/s 201(IA) @1.5% in case this was done but not paid.
Purchaser/Deductor will be liable to pay late fee U/s 234E @Rs.200 per day till the failure to pay TDS continues. However, penalty should not exceed the amount of TDS for which statement was required to be filed.
If a person fails to deposit TDS deducted as required by or under the provisions of Chapter XVII-B, shall be punishable U/s 276B, with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.
Points to note
- Dealings in agricultural land are excluded from the requirements of TDS provisions.
- If the consideration is being paid in instalments, TDS must also be deducted on each installment.
- If the total consideration exceed Rs.50 lakhs, TDS to be deducted @1% on entire amount and not the amount in excess of Rs.50 lakhs.
- If PAN is not provided by the seller, TDS @ 20% is deductible
The author is a Fellow member of The Institute of Chartered Accountants of India, New Delhi & Fellow member of The Institute of Cost Accountant of India, Kolkata. He can be reached at firstname.lastname@example.org.
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