Tds on property transfer

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TDS ON PROPERTY TRANSFER

VALLIACCOUNTS DEPARTMENT



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INTRODUCTION

TDS or best known as Tax Deducted at Source is one of the modes of collecting Income-tax from the assessees in India. This is governed under Indian Income Tax Act, 1961, by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service (IRS), Ministry of Finance, Govt. of India.



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OVERVIEW• In simple terms, TDS is the amount of tax getting

deducted from the person (Employee/Deductee) by the person paying (Employer/Deductor). This is designed to make the tax administration more effective, furnishing of returns convenient, reduce compliance cost and bring greater transparency.

• National Securities Depository Ltd. NSDL will be the primary agency responsible for the design, implementation and maintenance of Tax Information Network (TIN) as per the requirements of Income Tax Department (ITD)



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DEDUCTOR

Under the process of TDS, Deductor is a person/company who is liable to deduct the Tax at source, from the payment being made to the party. Deductor is also termed as Employer in cases where the payments are under Salaries.



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Deductee is the person, from whom the tax is being deducted or accrued for deduction. Depending on the nature of the deduction being made, deductees and respective submission forms are categorized to 3 types

1. Salaries: In case of salaries, the deductee is termed as an Employee. All the information of deductions and payments in this category should be submitted in Form 24Q to the government.

DEDUCTEE



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Contn..

2.Non-Salaries - Resident: In case of non-salaries and the payment is made to a resident in India, the deductee is termed as a Deductee or a Party. All the information of deductions and payments in this category should be submitted in Form 26Q to the government.

3. Non-Salaries – Nonresident: In case of non-salaries and the payment is made to a non-resident of India, the deductee is termed as a Deductee or a Party. All the information of deductions and payments in this category should be submitted in Form 27Q to the government



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TDS Certificates A tax deductor is also required to issue TDS

certificate to the deductee within specified timed under section 203 of the I T Act. The certification from the deductor, for the deduction and payment of the respective TDS amount to the bank, issued to the deductee is a TDS certificate. The deductee should produce the details of this certificate, during the regular assessment of income tax, to adjust the amount of TDS against the Tax payable by the Deductee



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Types of TDS certificates

Salaries - Form 16: In case of Salaries, the certificate should be issued in FORM 16 containing the Tax computation details and the Tax deducted & Paid details. This refers to the details submitted over Form 24Q.

Non-salaries - Form 16A: In case of Non-Salaries, the certificate should be issued in FORM 16A containing the Tax deducted & Paid details. Separate certificates should be prepared for each Section [nature of payment]. This refers to the details submitted over Form 26Q and 27Q.



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TDS on Transfer of property

In order to ensure that the real estate transactions come within the tax net, the Finance Bill presented along with the Budget 2012 proposes to insert new section 194LAA with effect from 01.10.2012 providing for TDS on transactions in immovable property (being land, building or any part of the building).



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Contn…

As per the proposed section purchaser (or transferee) of an immovable property will be required to deduct TDS @1% on the consideration paid or payable to resident transferor for transfer of immovable property, i.e. land or building or part of a building. The provisions do not apply if total value of the consideration does not exceed Rs. 50 lakhs if the immovable property is situated in specified area and Rs. 20 lakhs in other cases.



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Contn…

• Specified area for this purpose means urban agglomeration of Greater Mumbai, Delhi, Kolkata, Chennai, Hyderabad, Bengaluru, Ahmedabad and districts of Faridabad, Gurgaon, Gautam Budh Nagar (NOIDA), Gaziabad, Gandhinagar and City of Secunderabad.



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Contn…

• Purchase of Agricultural Land is excluded from the application of this provision, provided such agricultural land is situated beyond the specified distance from city limits as provided for in section 2(14) of the Act. Therefore, agricultural lands situated within such limits are covered by the TDS. It is also mentioned that purchase and sale of land as part of stock in trade are also included for TDS.



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Stamp Duty• The Bill also proposes that in case where

stamp duty value adopted by the stamp duty valuation authority is more than the apparent consideration the TDS is to be calculated with reference to the stamp duty valuation. Further it is also provided that no registering officer shall register any such document, unless the transferee furnishes a proof of deduction of tax and its payment.



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TDS Payment

• The TDS is required to be made either at the time of payment or credit of the seller whichever is earlier. Advance payment of land is of land is therefore also covered by the TDS provisions. While this increase substantial compliance requirement for each of the purchaser of the immovable properties, it is provided that a purchaser of property which otherwise does not have a Tax Deduction Number, need not to obtain the TAN only for deduction/payment of tax under this provision. therefore also covered by the TDS provisions



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The new provision will be applicable

w.e.f 1st October 2012.• The above provisions not only will increase the

revenue of the Government but will also help the income tax department to collect the data with respect to sale and purchase of the immovable properties. Seller of the said immovable property will be required to comply with all the provisions of capital gains tax and also declare the relevant information in the annual income tax return failing which the same may be treated suppression of income and non-disclosure of the facts.



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• Purchaser need to be extra cautious and must keep ready papers justifying source of income used for the purchase of such immovable property and its disclosure in the annual income tax return. Since proof of deduction of tax has to be submitted at the time of mutation with the registrar thus to avoid tax deduction at source is impossible. Invisible impact of this section is more than its visible impact.



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Rollback of TDS on Property Transfer

• New Delhi: The government rolled back the proposed one percent tax deduction at source (TDS) on transfer of immovable property.

• Initiating the debate on the Finance Bill for 2012-13 in the Lok Sabha, Finance Minister Pranab Mukherjee said the government had decided to roll back the levy after receiving various representations.



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• The Finance Bill proposes that every transferee of immovable property (other than agricultural land), at the time of making payment for transfer of the property, shall deduct tax at the rate of 1 percent of such sum,” Mukherjee said.



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• In the budget for financial year 2012-13 presented 16 March, the finance minister had proposed to levy TDS on transfer of immovable property, in a bid to tighten screw on corruption and black money in the property markets.

• I have received a number of representations pointing out the additional compliance burden this measure would impose. Therefore, propose to withdraw this provision for levy of TDS on transfer of immovable property.



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• However, industry body Confederation of Indian Industry (CII) and experts had criticised the move. The apex realty body CREDAI too said that this would lead to increase in property prices.

• Meanwhile, CII had said that the government should remove tax deduction at source (TDS) norm for the bonds floated by companies in order to strengthen the corporate bond market.



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• Gujarat chief minister Narendra Modi has written to Prime Minister Manmohan Singh on another issue related to “federalism”, this time on a provision in the union budget. Modi’s letter states that the proposal to impose 1% Tax Deducted at Source (TDS) on payment towards registration of immovable property will cause delays in the processing of documents, leading to adverse effects on the realisation of stamp duty on transactions, a domain of state governments. Modi sought the PM’s intervention to withdraw the proposal which comes into effect from October 1, 2012.



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• Since the proposed procedure involves proof of deduction and payment of TDS, it would complicate the entire procedure and result in delayed processing for registration of the documents. Dealing with two separate authorities for registration of documents would add to the problems,” states Modi’s letter. “Needless to say, it will affect the realisation of Stamp Duty, which is an important part of the state’s revenues.”



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By taking all these consideration as of now Government Rolled back the Proposed TDS on Property Transfer.



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THANK YOU

Tds on property transfer

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