Amendment in TDS Rule related to TDS deduction on purchase of immovable property
Category: Income tax act
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Amendment announced in Union Budget 2024 under Section 194IA related to TDS on purchase of immovable property
Every buyer on purchase of the immovable property on or after June 1st, 2013 shall be required to deduct TDS @ 1% of the purchase value or stamp duty value, whichever is higher. However, no TDS is required to be deducted if purchase value or stamp duty value does not exceed Rs. 50 Lakhs.
Following conditions to be fulfilled in nutshell-
1.
Transferor must be resident.
2.
Property must be immovable property such as land,
building, apartment etc.
3. TDS will be deducted at the time of credit of such sum to the account of the transferor, or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
4. If sale consideration or purchase price does not exceed Rs. 50,00,000/- no TDS liability arises.
5. Provision applies to both resident and commercial properties.
6. TDS payment has to be made with in 30 days from the end of the month in which TDS so deducted.
7. Buyer must pay TDS so deducted to government account and issue Form 16B to seller as proof of TDS deduction.
8. Buyer must submit Form 26QB while making payment of TDS through Income Tax Portal.
9. If there are more than one buyer/seller then 26Q has to be filed for each buyer seller combination separately.
For example, in case of one buyer and two sellers, two Form of 26Q have to filled and in case of two buyers and two sellers, four forms have to be filled in for each buyer seller combination in respective share of property.
10.TAN number is not required for this deduction.
11. In case seller does not provide PAN then rate of TDS will be 20%
Reason for recent amendment
Now the amendment announced since section was silent in case there are two or more either transferees or transferors or both.
In such situation each buyer/transferee would distribute their share of payment of consideration in such ratio that consideration payable by single buyer would reduce to Rs. 50 Lakhs so as to avoid TDS payment liability.
For example, Mr. A and Mrs. A purchased one apartment in joint ownership having sales value of Rs. 1.25 Cr. Where in Mr. A has to pay Rs. 80 Lakhs which is more that limit of Rs. 50 Lakhs and he deducted TDS @1% i.e. Rs. 80000/- and Mrs. A has to pay the remaining amount of Rs. 45 Lakhs on which she did not deduct and pay TDS @1% considering that consideration payable by her is below threshold limit of Rs. 50 Lakhs and avoided the TDS liability.
Or, in case of transfer of property which is jointly owned and transferred to one transferee/buyer than the consideration is paid to joint owners separately so that each payment would not exceed threshold limit of Rs. 50 Lakhs and again TDS liability can be avoided.
Amendment announced in Union Budget 2024
To curb such practices, recently Finance Ministry has introduced an amendment in section 194IA which will be applicable from October 1, 2024.
The new budget makes it clear that where there is more than one transferor (seller) or transferee (buyer) in respect of an immovable property, then such consideration shall be the aggregate of the amounts paid or payable by all the transferees to transferor or all the transferor for transfer of such immovable property.
This clarifies that Rs. 50 Lakhs threshold limit is to be applied collectively on total consideration payable/paid for the property irrespective of number of buyers and sellers.
For example, M/s ABC Limited has purchased a land in joint ownership with M/s XYZ Limited for total consideration of Rs. 2 Crores. It has been agreed that M/s ABC Limited would pay 1.50 CR and M/s XYZ Limited would pay Rs. 50 Lakhs. In such situation TDS u/s 194IA would be deducted @ 1% on total consideration of Rs. 2 Cr which comes out Rs. 2,00,000/- as per recent amendment.
Effect of amendment
1. On every
transaction of sale/purchase of property 1% TDS has to be deducted and pay to
government account irrespective of number of parties involved in the
transaction if consideration or stamp duty whichever is higher crosses the
threshold limit of Rs. 50 Lakhs. This clarification has removed all the
ambiguity between buyer and seller of property who were finding loopholes to
avoid compliance u/s 194IA.
2. Government
ensured with this amendment that section 194IA is being complied with as per
the intention of the legislature.
3. Any
non-compliance of TDS provisions related to purchase of immovable property
would attract following panel provisions-
a. In case TDS has not been deducted, the buyer would be required to pay 1% per month interest on amount of TDS supposed to be deducted.
b. In case, TDS has been deducted but not paid to government with in prescribed time limit, an interest of 1.5% per month on TDS not paid would be liable to be paid.
c. In case of late filing of Form 26QB penalty of Rs. 200 per day would be levied. However, penalty should not exceed the amount of TDS.
d. Penalty for not paying TDS on property may go up to Rs.100000/- u/s 271H of Income Tax Act, along with above mentioned panel provisions.
Summary
In the wake of recent amendment, buyers and sellers of immovable property transactions are advised to be extra cautious while making payment/receiving payment towards sales consideration and strictly comply with the provision of TDS applicable to such transactions to avoid hefty penalties in case of non-compliance.
