All about Tax deduction at Source (TDS) on Immovable Property Transfers

In the recent Budget presented in the parliament, the finance minister has introduced a new provision in the Income-tax Act,1961 , wherein certain property transfers were brought into the ambit of Tax Deduction at Source. This move by the Government of India is aimed at not only increasing the revenue for the Government but also to aid the Income-tax department to have an access on the information with regard to the Property transactions ,particularly high value property transactions and to have a better mechanism for taxing the same.

Transactions covered under this provision

Every transferee (Buyer of the Property) , at the time of making payment or crediting any sum by way of consideration for transfer of immovable property (other than agricultural land) , shall deduct Tax At Source (TDS) @ 1% of such sum ,if the consideration paid or payable for the transfer of such property exceeds :-

a)                          fifty lakh rupees in case of such property is situated in a specified urban agglomeration; or

b)                          twenty lakh rupees in case such property is situated in any other area.

Which are the specified urban agglomeration areas ?

Specified area for this purpose means urban agglomeration of Greater Mumbai,Delhi, Kolkata, Chennai,Hyderabad, Bengaluru, Ahmedabad and districts ofFaridabad, Gurgaon,Gautam Budh Nagar (Noida), Gaziabad, Gandhi nagar and City ofSecundrabad.

What if the consideration is lesser than the Stamp duty value?

Where the consideration paid or payable for the transfer of property is less than the value adopted or assessed or assessable by registering authority for the purposes of stamp duty, the value so adopted/assessed/assessable shall be deemed as consideration and tax has to be deducted at source on such amount.

What if the transferee fails to deduct tax?

For better compliance, it has been proposed that the registering officer (Registrar) shall not register the transfer of immovable property where the taxes are required to be deducted under this provision unless the transferee(buyer) furnishes proof of deduction and payment of TDS.

Procedure for remitting the tax deducted

A simple one page challan for payment of TDS would be prescribed containing details (including PAN) of transferor and transferee and also certain details of the property. Tax Deduction and Collection Account Number (TAN) will not be required.

What happens to the tax so deducted and paid ?

The transferor would get credit of TDS like any other prepaid taxes on the basis of information furnished by the transferee in the Challan of payment of TDS.

Date of applicability

This provision will take effect from 1^st October 2012.

Other Points :-

v     Purchase of agricultural land is excluded from this provision, provided such agricultural land is situated beyond the specified distance from city limits as provided in Section 2 (14) of the Income-tax Act,1961

v     If the land is situated within those specified limits, TDS will be applicable irrespective of the fact that the land is an agricultural land.

v     Consideration for the transfer is a requirement for being covered under this provision. Hence transfer by way of gift will not be covered under TDS.

v     TDS has to be deducted at the time of making payment or crediting sum in the books of accounts. Hence tax has to be deducted at source on Advance payments also. Actual registration of the property is not necessary.

v     The transferee would not be required to obtain any TAN number or to furnish any TDS Statement as this would be mostly a one time transaction.