06 October 2013
A partnership firm owns certain piece of land which it sold to two individuals for Rs. 1.60 Crores each one liable to pay Rs. 80 Lakhs. The Sale deed was made in December 2012 and all registration formalities were done in December 2012 only.But no consideration was paid by the individuals.Both the individuals are planning to make payment for the above land in October 2013.
Will the individuals be liable to deduct TDS @ 1% as per new Section 194IA, on any payment made to the Partnership Firm in October 2013, although Sale Deed is of before 1st June 2013(the date of applicability of Section 194IA)?
06 October 2013
The liability to deduct tax at source is at the time of actual payment or credit of such sum to the account of the transferor whichever is earlier. The threshold limit for application of tax deduction at source is Rs.50 lakhs. Where the transaction is less than Rs. 50 lakhs, the liability to deduct tax at source will not be applicable. Since the expression used in the section is "any sum by way of consideration" the provisions of section 50C will not interfere. Hence, tax deduction at source will be with reference to apparent consideration only. This provision Sec-194 -IA would be applicable in respect of transactions effected on or after 01.06.2013.
06 October 2013
1. Person responsible for tax deduction :- Any person responsible for paying any sum to a resident transferor by way of consideration for transfer of an immovable property (other than agricultural land in rural area) is liable to deduct tax at source u/s 194-IA.
2. Time of deduction :- At the time of payment or credit, whichever is earlier.
3. Rate of TDS :- TDS to be deducted @ 1% of the sum paid. However, TDS needs to be deducted @ 20%, if the deductee does not furnish PAN.
4. Threshold Limit :- No tax is deductible where the consideration paid or payable for the transfer of an immovable property is less than Rs. 50,00,000/-.
The Section has become applicable w.e.f. 1st June 2013.
Section 194IA is only attracted for the transactions on or after 1st June, 2013.
For example:-
Sale agreement is made before 1st June, 2013 but consideration received after 1st June, 2013 – Sec 194IA is not applicable.
Advance consideration of Rs 5000,000 or more is received before 1st June, 2013 but sale agreement made after 1st June, 2013. – Section 194IA is not applicable.
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