Introduction
In Income Tax Act,1961, Section 1941A deals with the transfer of an immovable property where tax should be deducted by the transferee being a non resident of the property. It has also introduced TDS where the transfer of property can be done by a resident transferor. This comes under Section 194 LA Finance Act, 2013. A person who buys a immovable property has to incur several taxes but the seller also has different tax liabilities and is also liable to pay TDS. Under Section 194- IA, any transferee who buys an immovable property other than agricultural land from the resident transferor in cheque, cash or any mode should deduct 1% of the total sum as income tax.
TDS- Concept
TDS also known as Tax deducted at source came into being to collect tax from the income source. On the basis of the form 26 AS, the person who credits the amount to a different account is the deductor and someone whose account is credited with the amount is the deducted. So, when the deductor credits the income of the deductee, he should deduct tax from the source of income and remit that particular deducted income to the account. There is a TDS certificate issued by the deductor which contains the minimum amount or above upon whom the tax is deducted. Normally people whose income is above 30,000 or above is entitled to deduction of tax.
Thus, the person who buys the proper is responsible to deduct the TDS amount and submit that to the government. The buyer gets liable for penalty due to failure to complete his duty. If the buyer failed to deduct the TDS amount, strict actions or penal actions can be taken against the buyer.
The government has come up with a new law to check the use of unaccounted money as well as where the buyer can deduct the TDS and also make a payment to the seller for the property.
TDS- Purchase of a Property
Under Section 194- IA of the Income Tax Act, any transferee who buys an immovable property other than agricultural land which includes residential property and commercial property from the resident transferor in cheque, cash or any mode should deduct 1% of the total sum as income tax. This section also says that a buyer has to deduct tax from the income at 1% interest only if the consideration amount or transaction value is equal to or above 50 lakhs.
Besides all these, if we talk about an NRI who is willing to sell his property, in that case the rate of TDS is much higher. The government deducts TDS from them as well capital gains tax.
TDS in Case of NRI's
NRI's can apply for the form 13 from the website of Income tax department so that they can avail a lower or No TDS deduction certificate. This happens only when their actual tax is less than 22.88%.
TDS- Time of Deduction and process of Payment
As from the above thing, we already know that the buyer or the purchaser has to deduct the TDS. Now the question comes when shall he/she do that?
TDS should be deducted at two times-
At the time of conveyance deed execution- A conveyance deed is a very essential document which is required for buying any property. Conveyance means transfer of a title, article, possession, ownership and rights of a property from the seller to the buyer. This is something which any buyer would look into first while buying any property.
At the time of advance payment or any kind of advance before the deed.
The buyer has to deposit this TDS amount and submit it to the central government within 30 days from the particular day in which the tax is deducted. The buyer has to fill a particular form to deposit this TDS amount. He has to fill the Form cum challan No 26QB before depositing. Suppose if a property has more than one buyer or more than one seller, then each person has to fill in separate forms where all details should be given.
What are the details required in the 26QB Form for payment of TDS?
Every person who is entitled to deduct the TDS amount should have a TAN which is Tax deduction account number. But if we talk about deducting TDS in an immovable property, then the buyer does not need the tax deduction account number. For filling the 26QB form, details like Pan card number, name, mobile number, emergency number, address (permanent) and email id of the buyer and seller is needed. Also, the address of the proper which is to be purchased, date of agreement and payment, total value of the property should also be provided. The payment of TDS can be both online or offline. If the payment is to be made online, then the buyer should visit an authorised bank and deposit the physical challan there. As a result the bank would update a the details of the same in the tax department's website. When everything is complete and deposited, the buyer can download the certificate in Form 16 B from the tax department website and provide it to the seller within 15-20 days.
TDS - Penal actions for non payment or breach of duty
It is the duty of the buyer to deduct TDS amount from the value and submit it to the government after deduction. This should be strictly followed as it is included in the provisions of law. If there is a failure of payment of TDS to the government within the said time period, a penalty in the form of interest or strict actions can be taken. In some cases, imprisonment of upto 7 years is also possible.
Conclusion
Thus, a buyer should always remember to deduct TDS amount from the transaction value and submit it to the government within a proper time period otherwise penal actions can be taken. Filling up of 26QB form is a must and all the details of the seller and buyer must be fully correct.