TDS ON THE SALE OF IMMOVABLE PROPERTIES – DETAILS IN A NUTSHELL


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