A. Legislative Flow (Legal Background For TDS on Sale of Property)
In this heading following topics will be covered:
- Why TDS on Sale of Property? (Memorandum / rationale explaining the introduction of Section 194-IA of the Income Tax Act for deduction of tax on transfer of certain immovable property other than agricultural land)
- Section 194IA – Payment on transfer of certain immovable property other than agricultural land
- Rule 30 – Time and mode of payment to Government account of TDS or tax paid u/s 192(1A) (Relevant Rule – Rule 30(2A))
- Rule 31 – Certificate of tax deducted at source to be furnished u/s 203 (Relevant Rule – Rule 31(3A))
- Rule 31A – Statement of deduction of tax u/s 200(3) (Relevant Rule – Rule 31A(4A))
- Form 16B prescribed under rule 31– Certificate from Buyer / Transferee to Seller / Transferor under section 203 of the Income-tax Act, 1961 for tax deducted at source
- Form 26QB prescribed under rule 30 & rule 31A– Return cum Challan for TDS on Sale of Property under section 194IA
1. Why TDS on Sale of Property? (Memorandum / rationale explaining the introduction of Section 194-IA of the Income Tax Act for deduction of tax on transfer of certain immovable property other than agricultural land)
There is a statutory requirement u/s 139A of Income-tax Act r/w rule 114B of the Income-tax Rules, 1962 to quote Permanent Account Number (PAN) in documents pertaining to purchase or sale of immovable property for value of Rs.5 lakh or more. However, the information furnished to the department in Annual Information Returns by the Registrar or Sub-Registrar indicated that most of purchasers or sellers of immovable properties, do not not quote or quoted invalid PAN in the documents relating to transfer of the property.
Under the existing provisions of the Income-tax Act, tax is required to be deducted at source on certain specified payments made to residents by way of salary, interest, commission, brokerage, professional services, etc. On transfer of immovable property by a non-resident, tax is required to be deducted at source by the transferee. However, there is no such requirement on transfer of immovable property by a resident except in the case of compulsory acquisition of certain immovable properties. In order to have a reporting mechanism of transactions in the real estate sector and also to collect tax at the earliest point of time, it is proposed to insert a new section 194-IA to provide that every transferee, at the time of making payment or crediting of any sum as consideration for transfer of immovable property (other than agricultural land) to a resident transferor, shall deduct tax, at the rate of 1% of such sum. To reduce the compliance burden on the small taxpayers, it is further proposed that no deduction of tax under this provision shall be made where the total amount of consideration for the transfer of an immovable property is less than fifty lakh rupees. This amendment took effect from 1st June 2013
2. Section 194IA – Payment on transfer of certain immovable property other than agricultural land
194-IA (1)
Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 1% of such sum or the stamp duty value of such property, whichever is higher, as income-tax thereon.
194-IA (2)
No deduction u/ss (1) shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property, are both, less than Rs. 50 Lacs.
194-IA (3)
The provisions of section 203A (Related to TAN) shall not apply to a person required to deduct tax in accordance with the provisions of this section.
Explanation to 194-IA
For the purposes of this section,
(a) “agricultural land” means agricultural land in India, not being a land situate in any area referred to in Section 2(14)(iii) items (a) and (b);
(aa) “consideration for transfer of any immovable property” shall 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.
(b) “immovable property” means any land (other than agricultural land) or any building or part of a building.
(c) “stamp duty value” shall have the same meaning as assigned to it in explanation to Section 56(2)(vii) (f)
3. Rule 30 – Time and mode of payment to Government account of TDS or tax paid u/s 192(1A) (Relevant Rule – Rule 30(2A))
Rule 30(2A)
Notwithstanding anything contained in Rule 30 (1) or (2), any sum deducted u/s 194-IA shall be paid to credit of Central Government within a period of 30 days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QB
4. Rule 31 – Certificate of tax deducted at source to be furnished u/s 203 (Relevant Rule – Rule 31(3A))
Rule 31(3A)
Notwithstanding anything contained in Rule 31 (1) or (2) or (3), every person responsible for deduction of tax u/s 194-IA shall furnish the certificate of TDS in Form No.16B to the payee within 15 days from the due date for furnishing the challan-cum-statement in Form No. 26QB under rule 31A after generating and downloading the same from the web portal specified by the Director General of Income-tax (System) or the person authorised by him.
5. Rule 31A – Statement of deduction of tax u/s 200(3) (Relevant Rule – Rule 31A(4A))
Rule 31A(4A)
Notwithstanding anything contained in Rule 31A (1) or (2) or (3) or (4), every person responsible for deduction of tax u/s 194-IA shall furnish to the Director General of Income-tax (System) or the person authorised by the Director General of Income-tax (System) a challan-cum-statement in Form No. 26QB electronically in accordance with the procedures, formats and standards specified under sub-rule (5) within 30 days from the end of the month in which the deduction is made
6. Form 16B prescribed under rule 31– Certificate from Buyer / Transferee to Seller / Transferor under section 203 of the Income-tax Act, 1961 for tax deducted at source
Link for PDF Form 16B
Certificate under section 203 of the Income-tax Act, 1961 for tax deducted at source
Image of Form 16B
7. Form 26QB prescribed under rule 30 & rule 31A– Return cum Challan for TDS on Sale of Property under section 194IA
Link for PDF Form 26QB
Challan –cum – statement of deduction of tax under section 194-IA
B. Information / Documents Required for compliance of TDS on Sale / Purchase of Property
C. Procedural Steps to Deposit TDS on Sale of Property under section 194IA through return cum challan in Form 26QB
D. Procedural Steps to download Form 16B (Certificate) for Seller / Transferor (After approximately 5 days of depositing TDS through return cum challan in Form 26QB
E. Consequences of Non-Compliance with the provisions or Non/Late filing of TDS Statements
F. Important Judgements
G. Other Frequently Asked Questions (FAQs)
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