Tax talk: Buying property worth more than Rs 50 lakh? Deduct TDS

From June 1, 2013, purchasers of immovable property (other than rural agricultural land) are required to deduct tax at source as per provisions of section 194IA of the Income Tax Act, 1961. However, this section is applicable only when sale consideration of the immovable property is more than Rs 50 lakh.

Tax deduction on source (TDS) on transactions of immovable property is to be done by the purchaser of immovable property at the rate of 1%. If the seller does not furnish his PAN, then the rate of TDS would be 20%. TDS is required to done by the purchaser at the time of payment or at the time of credit of account, whichever is earlier. Such tax would be deducted from the consideration being paid to seller and the tax so deducted needs to be deposited with the government.

TDS by the buyer at the time of making the payment to the seller has to be deposited within a period of 7 days from the end of the month in which deduction has been made. Such payment is to be done in Form 26QB.
According to the provision of Section 203A , any person deducting TDS shall also apply for a TAN under section 203A. This TAN is required to be quoted at the time of deducting any TDS, at the time of filing return and at the time of deposit of TDS with the government.

TDS under Section 194IA

However, Section 194IA (3) removes such hardship. It states that a person deducting TDS on property is not mandatorily required to quote TAN. According to Section 194IA, TDS is to be deducted at the time of payment. The date of transfer is not relevant. So, even if advance payment is being made TDS would be required to be deducted. In case the payment is being made in installments to the seller, then TDS would be deducted at the time of paying each installment.

In transactions where there is more than one buyer or seller and individual purchase price for each buyer is less than Rs 50 lakh, but the aggregate value of transaction exceeds `50 lakh, Section 194 IA would be applicable and TDS on such property is required to be deducted and deposited with the government before the due date.

The provision will apply even when the property is financed through a bank loan. The buyer will have to ensure that he himself or his bank deducts the tax before disbursing the loan to the seller.

By- Lakesh kumar

Source: Tax Guru