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Tds on immovable property

Rahul Jain (Accountant) (316 Points)

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)?

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3 Replies

Pratik Gujar (Article Assistant) (27 Points)
Replied 06 October 2013

Dear Rahul ,

According to my knowledge, they are not liable to deduct TDS since your deed is registered before 1st June, 2013.

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CA Pallav Singhania (IT System Auditor) (33362 Points)
Replied 06 October 2013

Agree with above reply,

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.

regards,

K T NAGESWAR RAO (CHARTERED ACCOUNTANT) (21 Points)
Replied 07 October 2013

Payment in respect of which tax is to be deducted Any sum by way of consideration (of Rs. 50 lakhs or more) for transfer of any immovable property (other than agricultural land) Who is responsible for tax deduction Any person (being a transferee) responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land.

Time of deduction Tax shall be deducted at the time of payment (in cash or by issue of a cheque or draft or by any other mode) or at the time of giving credit to the transferor (in the books of account of the transferee), whichever is earlier.

Rate of TDS 1 per cent.

Others Provisions of TAN shall not apply.

Since the time of deduction clearly says that TDS should be deducted at the time giving credit or payment whichever is earlier, If you have passed entry before 1st June,2013, Then TDS is not deductible. In case the transaction has been accounted for after 1st June, 2013, TDS shall be deducted at the time of payment or date of credit.