TDS :-Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land)

Sunday, June 8, 2014 | comments

Tax Deduction at Source (TDS) on transfer of certain immovable properties  (other than agricultural land) 

There is a statutory requirement under section 139A of the Income-tax  Act read with 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 Income-tax Department in Annual Information Returns by the  Registrar or Sub- Registrar indicate that a majority of the purchasers or sellers  of immovable properties, valued at Rs.30 lakh or more, during the financial year 2011-12 did not quote or quoted invalid PAN in the documents relating to transfer of immovable property. 

Under the provisions of the Income-tax Act, prior to its amendment by  the 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, a new section 194-IA has been inserted in the Income-tax Act 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 per cent of such sum. 

In order to reduce the compliance burden on the small taxpayers, it has  also been provided 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. 

Further, in view of the provisions of section 203A every person deducting tax under this newly inserted section 194-IA would have required to obtain Tax Deduction and Collection Account Number (TAN). In order to reduce the compliance burden on the deductor deducting tax under this section, it is provided that the provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of section 194-IA. 

Applicability: - This amendment takes effect from 1st June, 2013. 

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