Comprehending TDS on Sale of Immovable Property: Procedures for Filing

Comprehending TDS on Sale of Immovable Property: Procedures for Filing

The term “Property” referred to capital assets encompassing flats, buildings, and even plots of land. The primary motive behind property investment lies in its potential for profit through resale at a higher value. Immovable property, attracting real estate returns, witnesses frequent transactions, including purchases and sales. However, it’s crucial to acknowledge that property transactions carry various tax implications. This article explores the concept and filing process of TDS (Tax Deducted at Source) on the sale of immovable property.

Concept of TDS on Sale of Immovable Property:

Section 194IA, introduced by the Finance Act 2013 and applicable from June 1st, 2013, mandated individuals purchasing immovable property (excluding agricultural land) from residents to deduct TDS at a rate of 1% from the payable amount. TDS deduction was not necessary if the property value was less than Rs. 50 lakhs. Additionally, TDS was applicable to all types of immovable properties, including residential, commercial, or industrial, except agricultural land.

Laws Governing TDS Deduction on Property:

Section 194A of the Income Tax Act 1961 outlined provisions regarding TDS on the sale of immovable property. However, in cases involving Non-Resident Indians (NRIs) as sellers, Section 195 of the Income Tax Act 1961 would prevail instead.

Rules for TDS Deduction:

The rules governing TDS deduction on immovable property were as follows:

Calculation of TDS on Sale of Immovable Property:

TDS is deducted at 1% of the payable amount to the property seller. If the seller’s PAN is unavailable, TDS is deducted at 20%. No TDS is required if the consideration is less than Rs. 50 lakhs. When the consideration is Rs. 50 lakhs or more, TDS is deducted on the entire amount, not just the amount exceeding Rs. 50 lakhs.

Procedure for Filing TDS on Sale of Immovable Property:

Filing TDS can be done using two forms:

Form 26QB:

Form 16B:

Annual Return under GST Law if filed late:

Return filing was mandatory under GST. Even if no transactions were conducted, the return had to be filed. It was noted that:

Penalties for Non-Compliance in TDS Filing on Immovable Property:

Penalties for non-compliance with TDS filing on immovable property include:

Conclusion:

As per the Finance Act 2013, TDS is applicable to immovable property transactions where the consideration exceeds or equals Rs. 50 lakhs. Since June 1st, 2013, buyers are required to deduct TDS at 1% of the total consideration, either at payment or credit time.

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