Tax Deduction on purchase of Immoveable Property
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This provision is applicable on transfer of immoveable property of Rs. 50 lacs or more. It requires TDS to be deducted at 1% of the price being paid by the purchaser of an immoveable property, irrespective of quantum of capital gains. If the seller does not have/provide a PAN, the rate of TDS would be 20%. The property may be in the nature of land, buildings or flats. However, the deduction does not apply to purchase of agricultural land which is not located within municipal limits or within the specified distance from municipal limits.
Usually, tax has to deducted either at the time of credit or payment of consideration, whichever is earlier. In most of the cases of individuals purchasing immoveable property, the question of credit of consideration in the books of account should not arise, as there would be no books of account maintained for such transactions. Therefore, effectively TDS would be required to be deducted at the time of payment.
Such TDS would be deducted irrespective of who the seller is. whether a builder or a flat owner making a sale. However, the provisions fo this section does not apply on Non-Resident.
For the purposes of computation of the limit of Rs. 50 lacs, the total consideration, whether paid before 01 June 2013 or subsequently, would have to be considered.
Fortunately, the purchaser deducting such TDS is not required to comply with the cumbersome TDS procedural requirements applicable to other TDS deductors, such as obtaining a Tax Deduction Account Number, filing a TDS return, issuing a TDS certificate, etc. All that he is required to do is fill in a form online (www.tin-nsdl.com) or either make a e-payment or physical payment with the bank.
One practical difficulty which arise in situations when the purchase of property will be financed through a loan from a bank or housing finance company. In such cases, to the extent of the loan amount, the bank or finance company would directly make the payment to the seller, and not route the payment through the purchaser, who is the borrower.
There are many more issues which arise in respect of those provisions, particularly as to their applicability to development agreements where the considerations is in the form of a revenue share of sale proceeds.
(Compiled by ‘Prateek Manocha’ A Student of Institute of Chartered Accountants of India)
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