Boom in real estate business in India has led to inflating land prices owing to this their is a sharp rise in black money. Government has introduced a separate act to curb money laundering practices. However to ensure the purchase/sale of immovable property is correctly offered for taxation, Ministry of Finance introduced a new section 194 IA under Income-tax Act, 1961 with effect from June 1, 2013. This section requires deduction of tax at source @ 1% on sale of Immovable property, in case the transaction value is exceeding Rs. 50 lakhs or more.
Immovable property means any land (but not an agricultural land situated in rural area) or building (Shops, apartments, flats, bungalows, etc.) acquired by a Resident. Generally, deduction of tax at source requires a Tax deduction Account Number (TAN) and filing quarterly returns, by person deducting tax. Since the provisions of Section 194 IA are applicable to any buyer of immovable property where transaction value is equal to or more than Rs.50 lakhs, applying for TAN and filing return by every assessee for such transaction is not practical. To overcome this limitation and to provide relief to taxpayers, tax can be deposited as well as return can be filed, by using Permanent Account Number (PAN) of taxpayer under this section.
One may have a question as to who is responsible to deduct tax at source here. In this case, the purchaser of immovable property, who will make the payment to the seller, is required to deduct tax. Rate of deduction is fixed at 1 % of transaction value, but if the seller does not have PAN, then the rate of deduction will be at a higher rate of 20%. Transaction value means the price which is mutually decided by the seller and the purchaser or price as per the government valuation, whichever is higher. Tax is to be deducted on the date of credit of such sum or date of payment, whichever comes earlier. Interest shall be payable at 1% p.m. for late deduction of tax and 1.5% p.m. for late payment of tax.
Tax deducted shall be deposited to the Government within 7 days from the end of the month in which tax deduction is made. Online tax payment can be done by selecting form 26QB (return cum Chalan form) which is available on the website www.tin-nsdl.com under “TDS on Sale of Property” tab. The Form 26QB serves both the purposes, viz., payment of tax as well as filing of return for tax deducted and paid. Once the deducted tax is deposited and return is filed using Form 26QB, the purchaser of property is required to issue TDS certificate in Form 16B within 15 days from the due date of furnishing return cum challan in form 26QB. Form 16B will be available for download from the website of Centralized Processing Cell of TDS (CPC-TDS) www.tdscpc.gov.in. The acknowledgement of Form 26QB is also required to be produced at the time of registration/transfer of property in the name of Buyer.
As this section and system of online payment is new, people may hesitate to complete this process on their own and may require the help of professionals. This write-up is a small effort to make you well acquainted with all the legal formalities relating to TDS u/s.194 IA. In case, you have any query relating to this subject or any other income-tax related matter, you can raise it on our free “ask a question” service through myITreturn mobile app.