Tds on transfer of immovable property - 194IA

55
Section 194 IA Section 194IA TDS on Transfer of Certain Immovable Property other than Agricultural land Agricultural land Somaiya & Co. Chartered Accountants Compiled by :

description

Section 194IA of Income Tax Act - Applicability Procedure to make payment of TDS and Issue of Certificate

Transcript of Tds on transfer of immovable property - 194IA

Page 1: Tds on transfer of immovable property - 194IA

Section 194 IASection194‐IATDSonTransferofCertain

ImmovablePropertyotherthanAgricultural landAgriculturalland

Somaiya & Co.Chartered AccountantsCompiled by :

Page 2: Tds on transfer of immovable property - 194IA

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

Page 3: Tds on transfer of immovable property - 194IA

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.

Page 4: Tds on transfer of immovable property - 194IA

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.

Page 5: Tds on transfer of immovable property - 194IA
Page 6: Tds on transfer of immovable property - 194IA

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

Page 7: Tds on transfer of immovable property - 194IA

TypeofPropertiesCoveredunderSection194‐IA

Residential Property

Commercial PropertyCommercial Property

Page 8: Tds on transfer of immovable property - 194IA

TypeofPropertiesNotCoveredunderSec194‐IA

R l A i lt l L dRural Agricultural Land

Page 9: Tds on transfer of immovable property - 194IA

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.

Page 10: Tds on transfer of immovable property - 194IA

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

Page 11: Tds on transfer of immovable property - 194IA

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.

Page 12: Tds on transfer of immovable property - 194IA

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.

Page 13: Tds on transfer of immovable property - 194IA

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.

Page 14: Tds on transfer of immovable property - 194IA

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.

Page 15: Tds on transfer of immovable property - 194IA

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

Page 16: Tds on transfer of immovable property - 194IA

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

Page 17: Tds on transfer of immovable property - 194IA

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.

Page 18: Tds on transfer of immovable property - 194IA

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.

Page 19: Tds on transfer of immovable property - 194IA

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

Page 20: Tds on transfer of immovable property - 194IA

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

Page 21: Tds on transfer of immovable property - 194IA

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.

Page 22: Tds on transfer of immovable property - 194IA

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.

Page 23: Tds on transfer of immovable property - 194IA

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.

Page 24: Tds on transfer of immovable property - 194IA

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

Page 25: Tds on transfer of immovable property - 194IA

WhatifthesellerisGovernment?

No TDS is supposed to be deducted as the payment falls withinth bit f ti / 196the ambit of exemption u/s 196.

Page 26: Tds on transfer of immovable property - 194IA

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

Page 27: Tds on transfer of immovable property - 194IA

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

Page 28: Tds on transfer of immovable property - 194IA

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

Page 29: Tds on transfer of immovable property - 194IA

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

Page 30: Tds on transfer of immovable property - 194IA

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

Page 31: Tds on transfer of immovable property - 194IA

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

Page 32: Tds on transfer of immovable property - 194IA

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.

Page 33: Tds on transfer of immovable property - 194IA
Page 34: Tds on transfer of immovable property - 194IA

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

Page 35: Tds on transfer of immovable property - 194IA

StepstoPayTaxOnline

1. Log on to www.tin‐nsdl.com websiteg

Page 36: Tds on transfer of immovable property - 194IA

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”

Page 37: Tds on transfer of immovable property - 194IA

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”

Page 38: Tds on transfer of immovable property - 194IA

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

Page 39: Tds on transfer of immovable property - 194IA

DetailsofTransfereeandTransferor

Provide CompleteProvide Complete

address ofTransferee/Buyer

Provide Complete address

Transferor/Seller

Page 40: Tds on transfer of immovable property - 194IA

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

Page 41: Tds on transfer of immovable property - 194IA

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

Page 42: Tds on transfer of immovable property - 194IA

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.

Page 43: Tds on transfer of immovable property - 194IA

Continue…..OnProceed,confirmationpageisdisplayedtoverifythedetailsenteredentered.Onconfirmation,ninedigitalphanumericAcknowledgementnumberwouldbegeneratedE lExample:

9 Digit9 Digit Acknowledgement

Number

Page 44: Tds on transfer of immovable property - 194IA

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

Page 45: Tds on transfer of immovable property - 194IA

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”

Page 46: Tds on transfer of immovable property - 194IA

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

Page 47: Tds on transfer of immovable property - 194IA

StepstodownloadForm16Bi.e.TDSCertificate

1.Logontowww.tdscpc.gov.ing p g

Page 48: Tds on transfer of immovable property - 194IA

2. Click on “Register as New User”, then Click on “TaxPayer”

Click on Tax PayerClick on “RegisterClick on Register

as New User”

Page 49: Tds on transfer of immovable property - 194IA

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)

Page 50: Tds on transfer of immovable property - 194IA

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

Page 51: Tds on transfer of immovable property - 194IA

3.Logintowww.tdscpc.gov.in,thereyouneedtomakea request for Form 16BarequestforForm16B

Click on “Form 16B (For Buyer)”(For Buyer)

Page 52: Tds on transfer of immovable property - 194IA

FilltheDetailsaskedfor,thenClickon“Proceed”

c. Enter the PAN of Sellerb. Enter the

Acknowledgement Number

a. Select the Assessment Year from the drop down menu

Page 53: Tds on transfer of immovable property - 194IA

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

Page 54: Tds on transfer of immovable property - 194IA

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.

Page 55: Tds on transfer of immovable property - 194IA

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]