Tds on immovable property, tds on proerty, sale and purchase of property, transaction of property, purchase of property, incresed cost of property

Tax on purchases of Immovable property

As tremendous increase in real estate volume, Government of India in order to tighten the grip on real estate developer and persons involve in sale/purchase of real estate to regularize of payments of income tax. Income tax authority has imposed @ 1% tax on sale of immovable property except on agricultural land as TDS. Every buyer of immovable property except agriculture land has to deposit @ 1% of payments if the sale value of house/ immovable property exceeds Rs 50L.

Question: What kind of assets includes in Immovable property and on whom the section is applicable?

Answer: As per explanation of section 194IA, immovable property includes residential house, commercial complex, studio apartments, Land etc except agriculture land, and the section is applicable on every assessee on each kind of real estate transaction.

Every person (Individual or company, LLP Firm or every kind of assessee) who have transaction or purchases of immovable property, is liable to deduct tax @ 1% on sale value of immovable property and deposit with governments in seller’s PAN accounts within time specified as per Income tax act, 1961. Such person is dealer or else, tax deduction provision is applicable.  

 When Tax deducted at source: Every buyer of immovable has to deduct and pay tax on purchase of immovable property at time of making payments or accrued or credited in books of accounts, whichever is earlier. Buyer of immovable property and are applicable on the payments made on or after 1^st of June 2013.

Example: Mr. Ram has purchased a residential house on 11^th June 2013 for Rs 55 L. he paid the entire amount on 2^nd July 2013. He has credited the entry in his books of accounts on 12^th June 2013. Tax deduction on the transaction to be deducted on 12^th June 2013 and paid within 7^th of next month.

In above example if Mr Ram had purchased the house on 2^nd May 2013 and make payment before 31^st of May 2013. There is no requirement of deduction and paying tax on such transaction because the provision is applicable from 1^st June 2013.

What is rate of Tax to be deducted: Every buyer of immovable property has to deduct @ 1% tax on paid or payable amount if cost of house exceeds Rs 50L.  If seller of immovable property has no PAN, then tax will be deducted @ 20% instead of @ 1% of transaction on value of immovable property.

No Requirements of TAN: Now there is a requirement of TAN to deduct tax on purchase of immovable property. Instead of TAN buyer of immovable property will have to quote their PAN and can deposit the amount.

Explanation 1: When Indian resident purchases immovable property from NRI. How much tax to be deducted and paid to government of India?

As per section 194IA, tax is deducted and payable when immovable property is purchased from resident assessee of India. When such kind of transaction is undergone with NRI, then section 195 will be applicable and  tds @10% will be deducted instead of 1%.

Explanation 2: Tax will be deducted on cost of immovable property or value of stamp duty?

Every purchaser has to pay deduct and deposit tax on cost of property if its cost will exceed Rs 50L. Tax on such transaction is levied on cost of immovable property & not on stamp value of property.

Example Mr. Ram had purchased residential property of Rs 48 L and its Stamp value cost is Rs 56L. There is no need of deduct tax @1% on stamp duty value because real cost of house is less than Rs 50L.

Explanation 3: Weather cost of immovable property includes value of furniture and other facilities provided with residential house or commercial complex etc.

Buyer has to deduct and deposit tax on cost of property only. If cost of property includes value of amenity or furniture provided with immovable property, tax will be deducted only on part of cost of house & not on whole value of transaction. 

Please refer following chart for clarification of the provisions:

Date of registration	Cost	Date of payments	Paid	Applicable	Tax
1st April 13	40 L	2nd April	40L	No
Remarks	value of property is less than 50 L and purchases before 1st June 2013
1st April 13	60L	2nd April	60L	No
Remarks	Purchases made before 1st June 2013
1st April 13	40 L	2nd June 13	40L	No
Remarks	value of property is less than 50 L
1st April 13	60L	2nd June 13	60L	YES	1%
1st April 13	60L	2nd April	40L	NO
		2nd June 13	20L	YES	1%
Remarks	Rs 20 L is paid after 1st June 2013 , so TDs is charged on Rs 20L only
1st April 13	60L	2nd June 13	20L	YES	1%
		22nd July 13	40L	YES	1%