Finance Bill 2013 has introduced Section 194IA to cast an obligation on the buyer of a property to withhold taxes on payments to the resident seller. Buyers will require to deduct tax at 1% on the sale consideration payable to resident sellers. However, there is no obligation on the buyer to deduct tax when the immovable property is an agricultural land. Any seller not in possession of Permanent Account Number may be subject to tax deduction at a higher rate of 20%.
Some important provisions or points related to section 194 IA is as under:
- TDS to be deducted @ 1% of the total sale consideration. However, TDS needs to be deducted @ 20%, if the deductee does not furnish PAN.
- No tax is deductible where the consideration paid or payable for the transfer of an immovable property is less than Rs. 50,00,000/-.
- Online Payment of TDS through challan cum statement on Form 26QB through NSDL Website:- Tax so deducted should be deposited to the Government Account through any of the authorized bank branches using the e-Tax payment option available at NSDL. TDS so deducted shall be paid within 30 days from the end of the month in which TDS was deducted.
- TDS certificate must be issued to the deductee in Form 16B within 15 days from the due date of deposit of TDS.
- The deductee shall be entitled to avail credit for the entire amount of TDS deducted during the financial year in its Return of Income.
- Threshold limit of Rs. 50 Lacs will be applicable to each & every property separately. Property can be either of residential or official purpose.
- The threshold limit of Rs. 50 Lacs is with reference to each property. If a property transaction involves more than one buyer and share of each buyer in the property is less than Rs. 50 Lacs but the value of the property in aggregate is more than Rs. 50 lacs then provisions of section 194-IA will be applicable. In such case, TDS will be deducted and deposited by each buyer in respect of their respective share in the property.
- Similarly, in case of a property transaction involving more than one seller, TDS will be deducted in respect of amount paid to each seller and their respective PAN will be quoted while making payment through Form 26QB.
- TDS provisions of section 194-IA shall apply only if the transferor is resident in India.