Now, you will have to deduct tax when you make the payment to the seller if the cost of the immovable property exceeds Rs 50 lakh.
The Central Board of Direct Taxes has notified the new provision of tax deducted at source, or TDS, on immovable property exceeding Rs 50 Lakhs.
What is the New Rule ?
A new Section 194IA was introduced in Budget 2013-2014 / Finance Act 2013 which require the purchaser of an immovable property (other than agricultural land) worth over Rs 50 lakh to deduct TDS at the rate of 1% from the amount payable to a resident transferor.
From when it is Applicable ?
This new Section 194IA is applicable from 01-June-2013
At what rate TDS needs to be deducted ?
TDS needs to be deducted @ 1% , but it would go up to as high as 20% if the seller does not disclose his permanent account number.
Is it also applicable on Under-Construction Properties?
The provision will also apply in cases where buyer bought an under construction property prior to the provision coming into effect but has to make the balance payment after June 1, 2013.
TDS should be deducted each time an instalment is paid to builder.
TDS needs to be deducted on the WHOLE amount of property and not just the balance payments after 01-Jun-2013
As per some experts, TDS needs to be deducted ONLY if the amount payable after 01-Jun-2013 is more than Rs 50 Lakh and only on amount paid after 01-June.
What if the Property is financed through bank?
The provision will apply even when the property has been financed through a bank loan. Buyer will have to ensure either he himself or the bank deducts tax before disbursing the loan to the seller.
Check with your home loan company if they will deduct TDS before disbursement.
What to do after deducting TDS ?
Please read my other post on – How to pay TDS on Property (Form 26QB & 16B)
The tax deducted is to be paid electronically on the Income-tax Department’s website by filling a form online. If a person does not have the facility to pay tax online, he can take the printout of the duly filled form and make payment on any authorised branch
Govt has introduced new seb-section (3) under Section 194IA so that the TAN number is not mandatory for the person deducting TDS on property.
As per Notification 39 dated 31-May-2013, TDS deducted by buyer should be deposited within 7 days from end of month in which TDS was deducted.
You need to make the TDS payment in Form 26QB or online at NSDL website
https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp
The buyer will be able to generate the TDS certificate from I-T department’s website and provide it to the seller. The seller would also be able to see the TDS credit in 26AS statement.
Generate Form 16B from TRACES Wesbite. (Note there are frequent problems with TRACES & is not accessible)
Form 26QB – The online form available on the TIN website for furnishing information regarding TDS on property is termed as Form 26QB
- a) Acknowledgment number for the Form 26QB furnished is available in the Form 26AS (Annual Tax Statement) of the Deductor (i.e. Purchaser/ Buyer of property). The same can be viewed from the TRACES website (www.tdscpc.gov.in) or
- b)Taxpayer can also click the option ‘View Acknowledgment’ hosted on the TIN website. Taxpayer needs to enter PAN of the Buyer and Seller, Total Payment and Assessment Year (as mentioned at the time of filing the Form 26QB) to retrieve the Acknowledgment Number.
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. Form 16B will be available for download from the website of Centralized Processing Cell of TDS (CPC-TDS) www.tdscpc.gov.in
Please read my other post on – How to pay TDS on Property (Form 26QB & 16B)
TDS applicable even if no capital gain for Seller ?
So, if the seller sold a house for Rs 1 crore, the buyer has to deduct TDS @1% i.e. Rs 1 Lakh. Even, if the seller has no capital gains tax liability (buying other house / Capital Gain Bonds), TDS needs to be deducted by buyer. However, in case of TDS, he will have to wait for its refund from the Income Tax Department.
Joint Buyers / Sellers
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.
Need More Clarifications?
The rule does not distinguish between transfer of ready properties or under-construction properties.
Also, it needs to be clarified whether it is applicable on “New flat” bought directly from Builder – distinguishing between primary market & secondary market.
As of now, this new TDS rule @1% is applicable for all properties (except agriculture land)
UPDATE – 13 Jan 2014
As per CBDT circular 01/2014 dated 13-1-2013, no TDS is required to be deducted on Service tax portion of the bill. Read my post.
Summary – Quick Steps
The buyer have to
- (a) deduct 1.03 per cent of the consideration as tax (TDS)
- (b) fill up Form 26QB with details of the purchase
- (c) deposit the TDS online with the government within 7 days from month-end, and
- (d) issue TDS certificate in Form 16B.
Please read my other post on – How to pay TDS on Property (Form 26QB & 16B)