TDS @1% on Transfer of Immovable Property

TDS ON IMMOVABLE PROPERTY - 194 -IA

~ Budget 2013 ~

Object of bringing into effect the provision of Sec-194- IA: 

The Finance Minister has proposed that, in order to introduce a reporting mechanism of transactions in the real estate sector and also to collect tax, deduction of tax at source has been mandated for transfer of immovable property (other than agricultural land) to a resident transferor @1 % of the transfer consideration.

The reason for introducing section 194-IA is to widen the tax base and to check tax avoidance measures pertaining to the real estate sector.

Note: Any transaction other than agricultural land involving apparent consideration of Rs.50 lakh or more is liable for tax deduction at source under section 194-IA.

The provision sec-194I seeks deduction of tax at source on transfer of certain immovable property other than agricultural land referred to in section 2(14). Any person being a transferee who is liable to pay to a resident by way of consideration for transfer of any immovable property shall at the time of credit of such sum to the account of the transferor or at the time of payment in whatever manner, has to deduct tax at source at 1 percent. The liability to deduct tax at source is at the time of actual payment or credit of such sum to the account of the transferor whichever is earlier. The threshold limit for application of tax deduction at source is Rs.50 lakhs. Where the transaction is less than Rs. 50 lakhs, the liability to deduct tax at source will not be applicable. Since the expression used in the section is "any sum by way of consideration" the provisions of section 50C will not interfere. Hence, tax deduction at source will be with reference to apparent consideration only.

This provision Sec-194 -IA would be applicable in respect of transactions effected on or after 01.06.2013.