The Finance Bill 2013 had proposed to introduce Section 194IA to the Income Tax Act, 1961 (“the ITA”) which provided that the purchaser of an immovable property worth over Rs. 50 lakhs (other than agricultural land) is required to deduct tax at source at the rate of 1% from the consideration payable to the resident transferor.
The proposal has been accepted with the enactment of the Finance Bill, 2013. The provisions related to deduction of TDS on immovable property are as under:
- This provision is applicable in respect of transactions effected on or after June 1, 2013.
- It seeks deduction of tax at source on transfer of certain immovable property other than agricultural land referred to in Section 2(14) of the ITA.
- Any person being a transferee who is liable to pay to a resident by way of consideration for transfer of any immovable property shall at the time of credit of such sum to the account of the transferor or at the time of payment in whatever manner, has to deduct tax at source at 1%.
- The rate of deduction will go up to 20% in case the seller does not disclose his PAN No.
- 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.
The Central Board of Direct Taxes (“CBDT”) vide Notification No. 39/2013 dated May 31, 2013 has prescribed the procedure for paying TDS to the Government by amending the Income-tax Rules, 1962 as under:
- TDS payment under Section 194IA is to be accompanied by a challan-cum-statement in Form No. 26QB.
- The sum deducted under section 194-IA shall be paid to the credit of the Central Government within a period of seven days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No.26QB.
- Every person responsible for deduction of tax under section 194-IA shall furnish the certificate of deduction of tax at source in Form No.16B to the payee within fifteen days from the due date for furnishing the challan-cum-statement in Form No.26QB.
Form 16B and Form No. 26QB can be viewed as under –