Property buyers have to shell out more from now. From June 1, transfer of all immovable properties began attracting 1 per cent tax deducted at source (TDS).
According to section 194-IA, inserted in the Finance Act, 2013 in this year’s budget, TDS at the rate of 1 per cent is applicable when immovable property - any land (other than agriculture land) or building or part of the building - valued at more than Rs 50 lakh exchanges hands.
The income tax authorities justified the new tax regime with reasons such as prevention of undervaluation and under-reporting of realty transactions. The tax, in addition to stamp duty and value added tax (VAT), comes as yet another load for home buyers.
As there is hardly any residential or commercial property costing below Rs 50 lakh in Mumbai metropolitan region, the 1% TDS is going to pinch the pockets of all, say developers. Financial wizards, however, disagree (See box: Word from experts).
Features of the new provision
>> All buyers are obliged to pay TDS to the government, whether they are an individual, a firm or a company.
>> Tax shall be deducted at the rate of 1 per cent.
>> Tax is to be deducted either at the time of making payment or crediting any sum towards the transfer of property, whichever is earlier.
>> Buyer is not required to obtain a tax deduction account number (TAN).
>> Buyer has to furnish information regarding online transaction in form 26QB on the TAN website.
>> After furnishing of details of the transaction, deductor (that is, buyer) can make the payment immediately or subsequently through e-tax payment option or by visiting any of the authorised bank branches.
>> Tax deducted by the buyer has to be deposited within a period of seven days from the end of the month in which deduction is made, and shall be accompanied by a challan cum statement in Form 26QB.
>> Buyer is required to issue a TDS certificate in Form 16B to seller or builder in respect of the taxes deducted and deposited in government account.
Other key aspects:
>> If a seller fails to furnish his PAN number to the buyer then tax shall be deducted at 20%.
>> Tax has to be deducted at the rate of 1 per cent even if the seller claims exemption under sections 54, 54EC, 54F, 54GB of the I-T Act on reinvestment of the sale proceeds or capital gains, as the case may be.
>> If a buyer fails to deduct tax or when short deduction of tax has been done, a 1% interest would be levied for every month or part of the month on the tax amount from the date on which tax was deductible to the date on which tax was deducted.
>> If a buyer has deducted tax at source but failed to deposit it wholly or partly, a 1.5% interest shall be imposed for every month or part of the month on the tax amount from the date on which such tax was deducted to the date on which such tax is paid.
I think it’s a hassle for the buyer and will create additional burden for them in the form of paperwork. While buying a property we are Already involved in so much of documentation and this will add to the chaos.
-- Amod Tamahankar, businessman
I don’t think it is a cumbersome move for property buyers, largely because if we get things well documented today, it will benefit us in the long run.
-- Deepika Sahu, banker
I feel this will lead to additional scrutiny from the income tax authorities on us. Buying a home is anyway not a very easy task and this adds to the mess.
-- Shweta Shetty, financial analyst
-- By Varun Singh and Richa Pinto