Mr. Vineet Agarwal, Director, KPMG
As
per a newly introduced section in the Income -Tax Act, 1961, (I T Act), a tax
at the rate of 1 % will be deducted on transfer of immovable property of Rs. 50
lakh & above.
These
changes are effective from June 1, 2013, and immovable property will include
land (other than agricultural land). It will also include any building or /
part of a building.
The
earlier provisions of the income tax Act did not require buyers of immovable
property (Land and Houses) to deduct tax before making any payment to a
resident. A significant number of real estate transactions either remained
under reported or / unreported.
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| VINEET AGARWAL, KPMG |
Even
if they were reported, permanent accout number (PAN) was not mentioned or / incorrect PAN was mentioned. The latest
change has been introduced to track such property transactions & promote
proper reporting.
Section
194I A of the I T Act provides that any person, responsible for paying to a
resident transferor any sum by way of consideration for transfer of any
immovable property (other than agricultural land), shall, at the time of credit
of such sum to the account of the transferor or / at the time of payment of such sum in cash or
/ by issue of a cheque or draft or / by
any other mode, whichever is earlier, deduct an amount equal to 1 per cent of
such sum.
Further
it also mentions that no deduction is required if the consideration is less
than Rs. 50 lakh.
A
property buyer will be required to deduct tax from the payment & deposit it. The buyer would be required to
obtain the PAN of the seller, deposit TDS with the government & file a
challan-cum-statement in Form No 26 QB. A seller on the other hand will get a
reduced amount from the actual sale consideration, which he had never
anticipated.
Property
buyers will be required to issue a TDS certificate in Form 16 B within 15 days
to the seller. Form 16 B can be downloaded from the website of the tax
authorities. TDS credit would also be reflected in Form 26 AS of the seller for
claiming credit while filing the income tax return. It is important to note
that in the absence of PAN, TDS up to 20 % may be required to be deducted
instead of 1 %, subject to certain conditions.
While
the above changes may have some initial hiccups for property buyers &
sellers, it will ensure that there is proper tracking and reporting of property
transactions, and thereby, unearth black money, which is in the interest of the
nation.
(The writer Mr. Vineet Agarwal is a director in KPMG. Views
expressed are personal)
ABOUT VINEET AGARWAL..!
Mr.Vineet Agarwal is a Director at KPMG India. He has done his Chartered Accountant, Cost and Management Accountant & Company Secretary. Vineet has more than 15 years of experience in advising clients on personal taxation.
Mr.Vineet Agarwal has earlier worked with Arthur Andersen, Ernst & Young and Associated Cement Companies. Mr. Mr.Vineet Agarwal has worked extensively in the area of global mobility and employee taxation, for inbound and outbound employees. He has a great deal of experience which include issues relating to exchange control, immigration rules, interpretation of double tax avoidance agreements, equity incentives (stock options etc..), social security and retiral plans.
Mr.Vineet Agarwal has also worked with large Indian corporates on tax effective compensation structuring and payroll outsourcing. Vineet regularly contributes to the economic times, financial express and financial chronicle and also features on business channels.
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