Tax Deduction at Source (TDS) on transfer of certain immovable properties (other than agricultural land) for value  Exceeding Rs.50 Lakh effective from 01-06-2013

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.  This amendment is effective from 1st June, 2013.

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 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 the property.

Under the existing provisions of the Income-tax 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, it is provided  to insert a new section 194-IAwef 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.

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 (TAN) or to furnish any TDS statement as this would be mostly a one time 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 following details in the form for payment of TDS :-

  • 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
  • Tax Deposit Details



Mortgage refers to the security of something given as a guarantee of repayment.
Mortgage: Mortgage refers to “the transfer of interest in specific immovable property for the purpose of securing the payment of money advanced by way of loan”. It must be borne in mind that only immovable property can be mortgaged. Lands, buildings, installed machinery are included in immovable property. The mortgagor (debtor) remains the owner of the property. However, he parts with only that portion of it that has been mortgaged.

Following are the Kinds of Mortgage

1. Simple mortgage
2. English mortgage
3. Usufructuary mortgage
4. Sub mortgage

Simple mortgage: when the possession of the mortgaged property, is not delivered, the transaction is known as simple mortgage.English mortgage: it is an absolute transfer of ownership in the mortgaged property. After the transfer, the mortgager remains bound to pay mortgage money.

Usufructuary mortgage: if the mortgagor deliver the possession of the mortgaged property an allows the mortgagee (the creditor) to receive any income there upon adjustable to the interest and or the principal amounts, it is known as usufructuary mortgage.

Sub mortgage:- where mortgage( the creditor) transfers his interest in the mortgaged property, such an act is known as Sub-mortgage.

There are mainly six kinds of mortgage. They are simple mortgage, mortgage by conditional sale, Usufructuary mortgage, English mortgage, mortgage by deposit of title deed and Anomalous mortgage. In simple mortgage the mortgagor keeps the possession of the property offered as the security. The mortgagor is personally responsible for the discharge of the debt. In case the mortgagor defaults to repay the money, the mortgagee has the right to obtain a decree for the sale of mortgaged property to recover the loan.

In case of mortgage by conditional sale, it is a mortgage where the mortgagor sells the property to the mortgagee on the condition to repayment of loan the property will be restored on him by the mortgagee. In case the mortgagor falls to pay off the loan the mortgagee obtains the absolute proprietorship of the property. Mortgage by conditional sale is not a favorite security with the bankers as it is risky and cumbersome.

Usufructuary Mortgage: in Usufructuary mortgage the mortgagor actually delivers the possession of the property to the mortgagee. The mortgagee is entitled to rent out the property and receive the rent. On repayment of the loan the possession of the property is transferred to the mortgagor.

 Following are the kinds of sub-mortgage:
Pledge or pawn: It is contract under which an article is surrendered to the lender as security against the loan. The articles used as a pledge may include jewelry, share certificates, document, gold and other valuable things. The contracts as a pledge can only be effected when the articles are delivered to the lender.

Charge: where immovable property of the debtor is used as security for the payment of money to the creditor, is said to have a charge on the property. It is different from the mortgage in that the charge does not involve the transfer of interest in the property, while the mortgage does.

Lien: it refers to the right of holding in the goods of the debtor till he clears the debt. Lien may particular or general. In particular lien specific property is retained as a security. General lien is the right to retain all the goods the debtor. Banker, stockbrokers, factors, insurance companies, and warehouse exercise it.Hypothecation: Hypothecation refers to the mortgage of the movable property without transferring the possession of the goods. It is a right to recover the debt against the security of the specific goods.