The Central Board of Direct Taxes has notified that a compulsory tax (withholding tax) has to be deducted by a buyer of an immovable property (other than agricultural land) valuing Rs 50 lakh or more with effect from 1 June 2013.
Why this Rule?
The main objective for introducing this rule is to track all the high value real estate transactions, which are not being registered.
Who needs to deduct this tax?
As per the rules, the buyer of the property is required to deduct Tax (TDS) and deposit the same with the Government.
What is the rate at which tax needs to be cut?
The rate at which the buyer needs to deduct tax is 1% and it may go up to as high as 20% if the seller does not disclose his PAN. This rule also covers the property purchased through home loan.
How to calculate the tax amount?
If the amount of property you have purchased is Rs 60 lakhs, then you don’t have to pay tax only on Rs 10 lakhs but on the entire amount of sale consideration i.e. Rs 60 lakhs.
Do you need to apply for Tax Deduction Account Number (TAN) to pay the TDS as per the rule?
No, Buyer or Purchaser of the property are exempt to procure TAN which otherwise is mandatory in all cases wherever a person deducts tax (TDS).
How to deduct the tax, is it on the entire amount at one go on the payment of each installment?
Tax needs to be deducted for all the earlier payments made to the seller and if the payments are being made in installments then at the time of every installment.
What is the treatment in case there are joint parties (more than one buyer/seller)?
Chalan and Form 26QB needs to be filled in by all the buyers for respective sellers and for their respective share. For e.g. in case of one buyer and two sellers, two forms have to be filled in and for two buyers and two seller, four forms have to be filled in for respective property shares.
How to pay Tax (TDS) online?
1. Log on to NSDL-TIN website.
2. Click on the option 'TDS on Sale of Property'.
3. Select 'Online form for furnishing TDS on Property' (form 26QB).
4. Fill the details as required in Form 26QB
5. Then, click on the 'Proceed' button.
6. After validation of PAN, verify the details entered by you and click 'Confirm'.
7. After confirming, click the option for submitting it to the Bank and then login to the net-banking site with your user ID & password and enter the payment details.
8. On successful payment, a challan will be generated containing CIN, payment details and bank name through which e-payment has been made. This receipt is your proof of payment thus made.
9. Once a buyer makes the payment, he/she can download Form 16B from TRACES i.e. from the website of Centralized Processing Cell of TDS (CPC-TDS).
10. The buyer will be responsible to give the certificate of TDS in Form 16B to the seller within 15 days from the due date of submission of the 'challan' and the seller thus will be able to claim the credit for such TDS against his/her tax liability.
Important:
The above rule is also applicable in cases where the part payment is made before June 1, 2013 and the balance thereon. The provision will also apply in cases where the buyer has bought an under construction property prior to this rule coming into effect but the part payment is due after June 1, 2013.
