7. No requirement to obtain TAN by transferee deducting tax under section 194-IA
Section 194-IA was proposed to be inserted by the Finance Bill, 2013 to provide for deduction of tax at source@1% on consideration for transfer of immovable property, other than agricultural land. However, no tax is to be deducted if the consideration for transfer of immovable property is less than Rs.50 lakhs.
Since this provision requires deduction of tax by the transferee, it presupposes that the transferee should have a TAN. This may cause genuine hardship to those transferees who do not possess a TAN. Further, it would be an additional burden to require such persons to apply for and obtain TAN for a single transaction.
To address this concern, sub-section (3) has now been inserted in section 194-IA to provide that provisions of section 203A containing the requirement of obtaining TAN, shall not apply to a person required to deduct tax in accordance with the provisions of section 194-IA.
The media reports, as has always been the case, have widely publicised that the new TDS requirement has become a reality wef June 1.
1. It seems, however, the following aspect has been left unclear and with a grave doubt of a serious nature, hence begs for a well considered answer: Why and how, having regard to its terms, the tax withholding requirement can have application to a case where the subject matter of the transaction ( of transfer) is ‘unit’ of a building (say, Flat or Apartment)?For clues: Suggest, read closely the long winding definition specially introduced in the Act years ago,- albeit in a cumbersome manner,- so as to cover ‘unit’ of a building within the tax net – house property income and capital gains. There appears to be no such special definition for the purpose of section 194 IA. Further, no way to import and read such extant special definition into, for other purposes of the Act e.g. section 194 IA. 2. Another aspect, in one’s view not being free from doubt but lacking in clarity, hence must be of common concern, pertains to the timing of withholding. In one’s view, if special regard be had to the purport of the provision, – to be precise, of the clinching words used namely, ‘transfer’, ‘transferor’ and ‘transferee’, – withholding will be called for only at the time when the ‘transfer’ can be regarded to fructify in law. That is, earliest, when the document of transfer is registered. Sooner there is clarity brought about by the Revenue, better. Tax Experts at large, if inclined to share the doubts raised as genuine / not without substance, will do well to come out with a well-reasoned and logical opinion , to be of help to the mandatees. That could obviate any further muddling of the already messed- up TDS regime.
For clues, refer section 27 (iii b),AND section 2 (47) (vi) (rws 269UA)
Dear Sir,
Yes. Clarification is required regarding the `unit` of a building within the tax net-house property. Hope the department will come out with clear notification in this regard.
EP Team.