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TDS To Deduct On Transfer Of Property  Worth More Than Rs. 50 Lakhs

Be prepared for a new punch from CBDT as you will now have to deduct tax when you make the payment to the seller of an immovable property if the cost exceeds Rs 50 lakh. The CBDT has notified the new provision of tax deducted at source, or TDS, on transfer of immovable property effective from 1st June, 2013.

The Finance Act 2013 had provided that purchaser of an immovable property (other than agricultural land) worth over Rs 50 lakh is required to pay withholding tax at the rate of 1% from the consideration payable to a resident transferor.  The rate at which tax is to be cut is 1%, but it would go up to as high as 20% if the seller does not disclose his Permanent Account Number (PAN). 

Buyer will have to ensure either he himself or the Bank deducts tax in case of granting a loan to the seller before disbursement. The provision will 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 1st, 2013.

The tax deducted can 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.

The IT authorities have done away with the mandatory requirement of Tax deduction and account number for buyers. 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.

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, it is provided to insert a new section 194-IA effective from 01.06.2013 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% of such sum.

In order to reduce the compliance burden on the small taxpayers, it was further 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.

For reducing the further compliance burden on the transferee, it is also provided that a simple one page challan for payment of TDS would be provided containing details including PAN of transferor and transferee and also certain details of the property. The transferee would not be required to obtain any Tax Deduction and Collection Account Number i.e. TAN or to furnish any TDS statement as this would be mostly a onetime transaction.  The transferor would get credit of TDS like any other pre-paid taxes on the basis of information furnished by the transferee in the challan of payment of TDS.

The New Payment Challan for TDS requires the Property Purchaser to furnish details in the form for payment of TDS like 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, 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, Details of amount paid/Credited and Tax Deposit Details