The Indian Finance Minister while he had announced the Budget 2013-14 had introduced TDS Return on Property @1% on all the immovable property transactions which are over Rs.50 Lakhs under Section 194IA. He had done this with a view of improving the reporting of such transactions and the taxation of capital gains since this kind of transactions were usually undervalued and under-reported and almost half of the transactions didn’t even carry the PAN card No of the parties that were concerned.
This kind of TDS is to be deducted on all the types of Property Transactions irrespective of whether the property which is in consideration is a flat or a building or a vacant plot and it is required to be deducted irrespective of whether it is a residential property or commercial or industrial property. It is to be deducted on all the types of property transactions except agricultural land and is required to be deducted on the total amount which is paid to the seller excluding VAT and Service Tax and in all the cases irrespective of the capital gains arising to the seller. But in case the seller is of the opinion that excess TDS has been deducted, then he can claim a refund of excess TDS which is deducted while filing income tax return . The buyer cannot, however, apply for lower deduction of TDS and the TDS is required to be deducted @1% of the total property transaction value.
However some of the penalties which the person is required to pay for non-deduction / non-deposit of TDS on a property are :
- Interest on late deposit of TDS on Property
In case the TDS has not been deducted then the buyer would be required to pay 1% interest per month on the amount which is not deducted. In case, TDS has been deducted but it has not been paid, then the interest @1.5% per month would be applicable in such a case.
- Penalty for late deposit of TDS on Property
The income tax officer my however also levy a penalty of up to Rs.1 Lakhs for late deposit of TDS on a property.
- A penalty for late filing of form 26QB
In case of late filing TDS Return, a penalty of Rs.200 per day would, however, be levied.
Thus it is also to be noted that :
In case more than 1 buyer / 1 seller, form 26QB is required to be filled in separately for each of buyer-seller combination. The PAN Card of the seller as well as of the buyer should be mandatorily furnished in Form 26QB for furnishing the information about the TDS on a property and the sale transaction. If the seller does not have a PAN Card then TDS would be deducted @20% of the total transaction value.
Real estate is thus the matter of big money and to some extent of black money. This section was however introduced to curb the fraudulent activities , which therefore goes on reducing the consideration on paper, which will reduce the stamp duty, thereby causing a decrease in the government revenues. Thus by putting the onus on the buyer , the government has been successful in securing its revenue and encouraging good practices in the real estate market.