s. 194-IA of the Income Tax Act 1961 (the ITA’) was introduced by the Finance Act 2013. By virtue of this section, every transferee of an immovable property, at the time of making payment or crediting any sum as consideration for the transfer of immovable property (other than agricultural land) to a resident transferor, shall deduct tax at the rate of 1% of such sum. The provisions of this section would be applicable only to those cases where the total amount of consideration for the property exceeds INR 50 lakh.
The Memorandum to the Finance Bill 2013 stated that the object behind the introduction of this section was to have a reporting mechanism for transactions in the real estate sector and also to collect tax at the earliest possible point in time.
Accordingly, s. 194-IA was made applicable effective June 1, 2013.
The buyer of the property has to deduct TDS at the time of credit to the account of the seller or at the time of payment of such sum, whichever is earlier. The buyer shall deposit the TDS so deducted within 30 days from the end of the month in which the TDS is deducted. The buyer has to pay the TDS and furnish particulars in Form cum Challan (26QB).
The payment of TDS on immovable property does not require the buyer to have a TAN (tax deduction account number). The buyer is required to furnish the following information:
The buyer shall fill out Form 26QB using his PAN. It is mandatory for the seller to have a PAN too.
The buyer can choose to deposit the TDS online or offline. After the payment of TDS, the buyer shall issue the seller Form 16B within 15 days.
The buyer of the property is required to register and login on the TRACES using PAN (https://contents.tdscpc.gov.in/) to download Form 16B.
In case the buyer fails to deduct TDS or late deposits, the TDS fee under s. 234E of the ITA becomes applicable.
|Non-deduction of TDS
|1% per month from the date on which TDS is deductible to the date on which TDS is actually deducted
|Late deposit of TDS
|1.5% per month from the date of deduction to the date of payment
|Late filing fees under s. 234E
|In case of non-filing or late filing of Form 26QB, a late filing fee of INR 200 is liable to be paid for every day such failure continues