Concept of TDS for Real estate Industry:
Vide Finance Act 2013; concept of TDS on Real estate transactions was introduced in India. As per Newly inserted section 194IA, Any person, who purchases any immovable property (other than agricultural land) for a consideration, shall require to deduct tax at source @ 1% of the amount paid to resident seller; provided the consideration is INR 50 lakh or more.
Immovable property for this section means any land (other than agricultural land) or any building or part of a building. Further, this section puts burden on every buyers including non residents who are purchasing the property from the resident sellers. Further, property transaction between the real estate developers and individual assessee’s is also comes under the purview of this section i.e. the section will also apply on stock in trade. The section does not apply to for consideration received under the compulsory acquisition of the property as mentioned in section 194LA. Further this section does not apply in case the seller is the non- resident, as the same is covered by section 195 of the Income Tax Act.
TDS on real estate transaction (section 194LAA) was earlier proposed by Finance bill 2012, which was subsequently withdrawn for the reasons best known to the finance ministry. In comparison to earlier proposal, the scope of the newly inserted section has been diluted to a certain extent. The thrash hold exemption of INR 20 lakh for property situated in other than urban areas has not been incorporated in section 194IA; rather an exemption of INR 50 lakh for property situated in all areas has been provided. Due to this proposal, properties located in areas other than urban areas may be out of purview of this section. Further, proof of deposit of TDS which was mandatory for registration of property, as proposed in Finance bill 2012, has been ignored in section 194-IA.
Procedural Requirements:
Buyer of the property is required to deduct tax, at the time of credit of the consideration to the account of the seller or at the time of payment of such sum in cash, cheque, draft or any other mode. A simple, one pager, Form 26QB has been introduced for compliance of this section. Buyer of the property is not required to obtain TAN no. Buyer is required to furnish information as prescribed in Form 26QB which includes
— Full Name, Address & PAN of Buyer and seller
— Address of the property
— Value of property, Date of agreement / booking
— Amount paid / Credited, payment in installments or lumpsum
— TDS etc.
Subsequently, Buyer can make the payment online or offline, within 7 days from the end of the month in which deduction is made. TDS certificate [Form 16B] will be issued by the buyer to the seller within 15 days from the due date of payment of taxes. The same needs to be generated from www. tdscpc.gov.in
Penal Provisions for non compliances:
As per section 201, In case assessee fails to comply with the procedural guidelines of TDS provisions [deduction or payment], then the assessee will be treated as an assessee in default.
As per section 201(1A), in case of failure to deduct Tax or short deduction of TDS, interest @ 1% will be levied for every month or part of the month, on the amount of tax, from the date on which tax was deductible to the date on which the same is deducted. Further, when the buyer has failed to deposit wholly or partly tax so deducted, Interest @ 1.5% will be levied, for every month or part of the month, on the amount of tax, from the date of deduction till the date of actual payment.
As per section 271C of the Income Tax Act, penalty for non deduction / non-payment of TDS are equal to the amount of Tax which the assessee failed to deduct or pay [This penalty shall be imposed b the joint commissioner]. Further, Sec 221 provides for penalty to be paid as directed by the assessing officer which shall not exceed the amount of TDS.
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