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Section 194 IASection194‐IATDSonTransferofCertain
ImmovablePropertyotherthanAgricultural landAgriculturalland
Somaiya & Co.Chartered AccountantsCompiled by :
Why TDS on transfer of Immovable Property?
Mr. P. Chidambaram whileintroducing TDS on Property saidthat the transactions of ImmovableProperty are usually undervaluedd d t dand under‐reported
The parties don’t even mention thePAN No. in the agreement or whileentering into the transaction.
With a view to improving thereporting of such transactions, theSection 194‐IA was introduced in theFinance Bill of 2013
Introduced through Finance Act 2013
CBDT vide its notification no. 39/2013 dated 31st May, 2013 hasCBDT vide its notification no. 39/2013 dated 31 May, 2013 hasprescribed the rules regarding Mode of Deduction, Deposit andIssuance of TDS Certificates in respect of deduction made ontransfer of certain Immovable Properties other than ruraltransfer of certain Immovable Properties other than ruralagricultural land value equal to or exceeding Rs. 50 lakhs as per newprovisions of Section 194‐IA
Means a Person purchasing a property other than agricultural landhaving agreement value equal to or exceeding INR 50 Lakhs has todeduct TDS u/s 194‐IA and pay into government treasury.
Applicability of Section 194‐IA
This new section is applicable w.e.f This new section is applicable w.e.f01st June, 2013 for sale ofimmovable property (other thanagricultural land)agricultural land)
Consideration should be Rs.50 lacsor above
The purchaser is exempt from the The purchaser is exempt from theobligation to obtain TAN, which isotherwise mandatory for alld d tdeductees.
Exemption Limit
No TDS is required to be deducted where consideration is lessthan Rs. 50 lakhs
The limit of Rs. 50 lakhs is per property and not aggregatevalue of consideration of all properties during the yearvalue of consideration of all properties during the year
TypeofPropertiesCoveredunderSection194‐IA
Residential Property
Commercial PropertyCommercial Property
TypeofPropertiesNotCoveredunderSec194‐IA
R l A i lt l L dRural Agricultural Land
What is Rural Agricultural Land?
The meaning for Agricultural Land is given under Section 2(14) ofthe Income Tax Act, 1961 under Definition of Capital Assets
Th t diti t k l d i lt l l d There are two conditions to make land an agricultural land:i. in government records, the use of land must be for agriculturalpurpose, andii. the criteria of distance from a town as per Section 2 (14) iii (a)and (b) the land in question must be situated away from certaindistance from any municipality or cantonment board the distancedistance from any municipality or cantonment board, the distancedepending on the population of the town.
Continued…
Interestingly, if the land is situated within the periphery of grampanchayat, having population above the limit of populationprescribed in Section 2 (14) iii (a) and (b) yet it be will treated asagricultural land. Section 2 (14) refers to distance from “municipalg ( ) ptown and not from panchayat “though both municipality andpanchayat are human habitant but the difference betweenpanchayat and municipality is, panchayat is governed by thepanchayat and municipality is, panchayat is governed by thepanchayat act and municipality is governed by a different act,considering this land is situated in proximity of any panchayatirrespective of population, will be treated as “agricultural land”irrespective of population, will be treated as agricultural land
RateofTaxDeduction
TDS needs to be deducted @ 1% on purchase TDS needs to be deducted @ 1% on purchasevalue of immovable property.
If seller doesn’t have PAN or if it is not valid,tax needs to be deducted at a higher rate of20%.0%
However, practically online forms do notaccept transaction without PAN. Hence, onewill have to obtain PAN for the same.
Types of Person Covered
Purchaser and seller may be anyone i.e. eitherindividual/HUF/AOP/BOI/Partnership firm/LLP/Company/Artificialjuridicial person.
This is as per definition of person covered under Section 2(31) ofthe Income Tax Act, 1961.
WhoisLiabletoDeductTaxandWhen?
The Buyer of the Property needs to deduct TDS at the time ofThe Buyer of the Property needs to deduct TDS at the time ofmaking payment to the seller or at the time of booking in books ofPurchaser whichever is earlier.
DepositofTax
Any tax deducted under section 194‐IA will be Deposit within 7 days from the end of month in which tax was
deducted.
Deposit by way of Challan‐cums‐statement in Form 26QB.
Electronic Payment compulsory.
TDSReturn
No need to file TDS Return separately on Quarterly basis
TDS Challan‐cum‐Statement i.e. 26QB shall need to be filled foritti TDS t t t hi h ll th d t ilremitting TDS amount to government which covers all the details
as required to be furnished under TDS Return
TDS Certificate
TDS Certificate in respect of deduction under section 194‐IA will beissued by deductor in Form No 16B
F 16B h t b i d ithi 15 d f th d d t f Form 16B has to be issued within 15 days from the due date ofdepositing tax
Form 16B will have to be downloaded from income tax web portal
NonComplianceofProvisionsofSection194‐IA
In case of failure to comply with the provisions, interest and penalty would beimposed to the purchaser as per section 201(1A):
Interest will be charged @ 1% p m or part of the month for failure to deduct Interest will be charged @ 1% p.m or part of the month for failure to deducttax or short deduction of tax from the date the tax was deductible till the datethe same is deducted.
Interest will be charged @ 1.5% p.m or part of the month for tax deductedbut not paid to the government from the date of deduction till the date ofactual paymentactual payment.
Points to be remembered by thePurchaser of the PropertyPurchaser of the Property
Deduct tax @ 1% from the sale transaction. Deduct tax @ 1% from the sale transaction. Collect the PAN No. of the seller and verify the same with the
original PAN Card. PAN of the seller as well as the purchaser should be mandatorily
furnished in the online Form for furnishing information regardingthe sale transaction.
Do not commit any error in quoting the PAN or other details in theonline Form as there is no online mechanism for rectification oferrors For the purpose of rectification you are required to contacterrors. For the purpose of rectification you are required to contactIncome Tax Department.
Points to be remembered by theSeller of the PropertySeller of the Property
Provide your PAN to the Purchaser for furnishing informationregarding TDS to the Income Tax Department
Verify Deposit of taxes deducted by the Purchaser in your Form26AS26AS
Whether TAN is required for Purchaser?
No need to register for TAN with No need to register for TAN withDepartment
You can use your PAN to deposit taxdeducted from payment made tosellerse e
WhatifthePropertyisheldbyJoint‐Owners?
In case of joint owners, the threshold limit of Rs 50,00,000/‐ is to bedetermined property‐wise and not transferee‐wise.
The number of buyer or seller would not matter at all. The value ofproperty should be more than Rs 50,00,000/‐ for applicability ofdeduction of tax.
For example:‐d j i l h d i bl h h iA,B and C jointly purchased an immovable property. The purchase price
for each owner is Rs 20lakhs, Rs 15 lakhs and Rs 35 Lakhs respectively. Inthis case individual purchase price is less than Rs 50,00,000 but theaggregate value of the transaction exceeds Rs 50 00 000 Thus sectionaggregate value of the transaction exceeds Rs 50,00,000.Thus section194‐IA would be applicable.
WHAT IF PART PAYMENT OF RS. 30 LAKHS HAS ALREADYBEEN MADE BEFORE THE APPLICABILITY OF THE SECTIONBEEN MADE BEFORE THE APPLICABILITY OF THE SECTIONAND REST RS. 25 LAKHS TO BE MADE THEREAFTER, THEREBYTOTAL AMOUNT EXCEEDING THE LIMIT
As per the provisions the TDS has to be deducted at the time ofpayment or credit so the payment made earlier prior to the date ofpayment or credit so the payment made earlier prior to the date ofapplicability of this section is not liable to TDS. On rest of thepayment the buyer will have to deduct the tax.
What are the provisions if Payment is made to aNon‐Resident?Non‐Resident?
If payment is made to a Non Resident then If payment is made to a Non‐Resident thensection 194‐IA will not be applicable.
Rather section 195 will be attracted and TDSis required to be deducted @20%+EC &SHEC on the sale consideration.
Surcharge @10% will be applicable if amount paid exceeds Rs 1crore.
The limit of Rs 50 00 000/‐ is not applicable in case of payments The limit of Rs 50,00,000/ is not applicable in case of paymentsmade to NRI’s.
What if after charging Service Tax on value ofRs 49 lakhs Payable amount is equal to or greaterRs.49 lakhs, Payable amount is equal to or greaterthan 50 lakhs?
TDS has to be deducted as the total amount payable exceeds theti li it hi h i bl t th llexemption limit which is payable to the seller
WhatifthesellerisGovernment?
No TDS is supposed to be deducted as the payment falls withinth bit f ti / 196the ambit of exemption u/s 196.
What if the Property is financed through Loan?
A standing instruction shall be furnished to bank to remit amountdirectly to seller after deducting TDS @1% of the total paymentmade and asked to deposit the same with government by themdirectly.
In case of purchase of property from seller with consideration to payin installments, then TDS shall be deducted @1% on all theinstallments which are due on or after 01 06 2013installments which are due on or after 01.06.2013
Whether transfer includes any right likedevelopmental right/exchange/relinquishment ini bl ?immovable property?
Section 2(47) of the Income Tax Act defines Section 2(47) of the Income Tax Act defineswhat is “Transfer”
According to the section “transfer” includes:gi. Saleii. Exchangeiii. Relinquishment of the assets oriv. Extinquishment of any rights there in
Hence, it can be said that Section 194‐IA applies to all i.e.developmental right, exchange, relinquishment in immovableproperty
Immovable Property – As a Gift!!!
The Section states that payment would include byway of cash, draft or any other mode.
In case of family arrangement, there is no sale, neitherthere is any consideration the assets are transferred without anythere is any consideration, the assets are transferred without anyconsideration, in that case this section will not be applicable
Immovable Property – Exchanged!!!
In case of Exchange of Assets, since one asset is transferred in lieuof other asset, it will be subject to TDS because there is some kindof consideration In such cases both seller and buyer will need toof consideration. In such cases both seller and buyer will need todeduct tax of each other
Can Seller apply for a lower deduction certificate
In view of saving citizens from the unwarranted exerciseof deduction of tax, then claiming refund from the government,Section 197 was introducedSection 197 was introduced
However in Section 197 payments made under Section 194 IA isnot covered, so the seller cannot apply for a lower deduction
tifi tcertificate
Lump sum sale of business
For this there is no guidance available in the law However as per section 2(42C) “slump sale means transfer
of the business for a lump sum consideration without anyvalue assigned to individual assets and liabilitiesvalue assigned to individual assets and liabilities
In such a sale there is transfer of undertaking whichincludes transfer of immovable property but there is no
f f i bl di ltransfer of immovable property directly Hence Section 194 IA will not be applicable in case of slump
sale
Consequences of cancellation of deal
Two situations are possible: Either the Seller will forfeit the Two situations are possible: Either the Seller will forfeit theadvance or he will return the money to the Buyer
If the seller forfeits the amount then it becomes “capital receipt”f ll hi h i t t bl h th TDS t b l i d bfor seller which is not taxable, hence the TDS can not be claimed bythe seller in his return as per Sec 199 read with rule 37BA(3)(i).
In case, seller refunds the entire amount with TDS, the TDS creditmay be claimed on the principal of unjust enrichment.
RequirementforPaymentofTDSbyBuyer
Permanent Account No. (PAN) of Transferee(Payer/Buyer) Permanent Account No. (PAN) of Transferor (Payee/Seller) Category of PAN of Transferee Category of PAN of Transferor Category of PAN of Transferor Full Name of the Transferee Full Name of the Transferor Complete Address of the Transferee Complete Address of the Transferor Complete Address of the Property Transferred Complete Address of the Property Transferred Details of amount paid/Credited Tax Deposit Details
StepstoPayTaxOnline
1. Log on to www.tin‐nsdl.com websiteg
2. Under TDS on Sale of Property, click on the option “ li f f f i hi ”“Online form for furnishing TDS on Property”
a. Click on the option “TDS on
Sale of Property”
b. Click on the option “Online Form for
furnishing TDS onSale of Property furnishing TDS on property”
3. Select Form for Payment of TDS on Purchase of Property (Form 26QB)Property (Form 26QB)
Click on the option “Payment of TDS on Sale of Property”
4. Fill in Details in Form 26QBSelect financial Year for
Select Tax applicable for which payment is
to be done
Select financial Year for which payment is to be
done
Mention PAN of the Transferee/Buyer
Mention PAN of Transferor/Seller
Re-enter PAN of Re enter PAN ofRe enter PAN of Transferee/Buyer
Re-enter PAN of Transferor/Seller
DetailsofTransfereeandTransferor
Provide CompleteProvide Complete
address ofTransferee/Buyer
Provide Complete address
Transferor/Seller
DetailsofPropertySelect Relevant Type of
Property from the drop down menu
Provide Complete Address of Property Transferred
Mention the date of Agreement /Booking of Property
Mention total value of consideration (Property Value)
Mention if the above payment isMention if the above payment is done in Lump sum or in
Installments
DetailsofAmount
Please enter the amount /paid/credited to the
Transferor/Seller
Please enter the amount paid/credited to the transferor/
Seller
Please enter the TDS Rate at which TDS deducted by the
purchaser
Please enter TDS Amount to be paid
FinalDetailsinForm26QBPlease select the modePlease select the mode
of payment of Tax
Select the bank through which payment is to be made
Select the date of payment/credit
S l t th d t f D d tiSelect the date of Deduction
Please enter the characters.
After entering all the above required details please click on PROCEED button to continue.
Continue…..OnProceed,confirmationpageisdisplayedtoverifythedetailsenteredentered.Onconfirmation,ninedigitalphanumericAcknowledgementnumberwouldbegeneratedE lExample:
9 Digit9 Digit Acknowledgement
Number
5. Payment of Tax
On clicking on Submit to the Bank, Deductor will have to login to the net-banking site with the user ID/ password provided by the bank for net-banking purpose.
On successful login, enter payment details at the bank site.
On successful payment a challan counterfoil will be displayed containingp y p y gchallan Number, payment details and bank name through which e-paymenthas been made. This counterfoil is proof of payment
6. View Acknowledgement Number
In case Acknowledgement Number is not saved by us then we can get it from website.
Login to www.tin‐nsdl.com
a. Click on the option “ TDS on Sale of Property”
b. Click on “View Acknowledgement
Number”
Enter the Details
Enter PAN of Transferee/Buyer
Enter PAN of Transferor/Seller
Enter the amount of taxEnter the amount of tax paid
Enter the relevant Assessment Year
Enter the characters shown
Then Click on Submit
StepstodownloadForm16Bi.e.TDSCertificate
1.Logontowww.tdscpc.gov.ing p g
2. Click on “Register as New User”, then Click on “TaxPayer”
Click on Tax PayerClick on “RegisterClick on Register
as New User”
Continued…..
Y ill b k d id B i D il h You will be asked to provide Basic Details such as your:i. PANii Date of Birthii. Date of Birthiii. Last, Middle and First Name and would also be required to
further validate details of either tax deducted (Option 1) or tax id b (O ti 2)paid by you (Option 2)
ValidationofDetails
On Validation of details, your account will be created User ID by default would be your PAN, You would have the option
of providing Password of your choice A il ld b t ti ll t d idi An email would be automatically generated providing you an
activation link with a second code being text on your mobile.Having activated your account, it is now ready to be used
Services currently available would be: to view 26AS statement anddownload Form 16B in case you are the buyer of immovablePropertiesp
3.Logintowww.tdscpc.gov.in,thereyouneedtomakea request for Form 16BarequestforForm16B
Click on “Form 16B (For Buyer)”(For Buyer)
FilltheDetailsaskedfor,thenClickon“Proceed”
c. Enter the PAN of Sellerb. Enter the
Acknowledgement Number
a. Select the Assessment Year from the drop down menu
4.AfterasuccessfulRequestmade,youcandownloadForm 16B from “Requested Downloads” sectionForm16Bfrom RequestedDownloads section
Please note the Request Number to search for the download Please note the Request Number to search for the downloadrequest
After some time the same shall be available under downloadCli k “R t d D l d ”menu, Click on “Requested Downloads”
Enter the Request Number (Option 1) or Request Date (Option 2)to search for the download request
List of all the Requests would be displayed, Click on the rowcontaining Form 16B and then click on HTTP Download
Print sign and send the Form 16B to the Seller Print, sign and send the Form 16B to the Seller
Disclaimer
This presentation provides general information existing as at thetime of preparation. The presentation is meant for generalguidance and no responsibility for loss arising to any person actingor refraining from acting as a result of any material contained ing g ythis publication will be accepted by Somaiya & Co. It isrecommended that professional advice be taken based on thespecific facts and circumstances. This presentation does notspecific facts and circumstances. This presentation does notsubstitute the need to refer to the original pronouncements.
Thanking you !!Thanking you..!!Last reviewed on 26/05/2014
TeamSomaiya & Co
on 26/05/2014
Somaiya & Co. Chartered AccountantsContact : 288 288 44 ; 288 288 55Email : [email protected] : [email protected]