Skip to main content

Withhold TDS when purchasing property from builder

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

 

When I met my friend Ameya Joshi last weekend over coffee, he excitedly informed me that he had recently booked a fourbedroom apartment in an upcoming scheme of a reputed builder. He went on to explain how good a deal he had bagged, both from the builder and the bank financing his loan, and how he had no need to worry at all since the bank had taken full responsibility to disburse the loan instalments to the builder as and when the project was completed over the next couple of years.  

 
My tax brain immediately spun into action and I asked him whether he had made any provision to withholding income tax on the payments to be made to the builder. Upon finding that he was completely unaware about this requirement, I went on to explain. Effective June 1, 2013, the income tax rules require the purchaser of any immovable property (except of agricultural land) of value exceeding ₹ 50 lakh to withhold income tax at the rate of 1 per cent and deposit it with the government at the time of credit or payment of such sum (whichever was earlier) to a seller who was a tax resident of India. This provision was introduced by the government to improve reporting in the real estate sector and to collect income tax at the earliest.

Hearing this, Joshi mentioned that since his bank would make direct payment to the builder, he need not worry about this statutory requirement even though the value of his apartment crossed ₹ 50 lakh. Iduly warned him, nevertheless, that the law casts the responsibility on the 'transferee', that is, the buyer, to withhold income tax at source. And that the bank might not always withhold the tax since it was only acting as his disbursing agent. Since, non- deduction of tax at source might attract penalties, it was Joshis duty to ensure that the tax was paid.

Seeing that Joshi was turning worried about the number of compliances he would need to undertake, I assured him that the government had already considered this, and that he would not be required to obtain a tax- deduction account number (TAN) nor to file a quarterly tax withholding statement. Instead, he would simply be required to fill up the requisite challan in Form 26QB and deposit the appropriate tax within seven days from the end of the month in which the amount was deducted.

I further explained that in Form 26QB, one needed to indicate relevant particulars such as name, address and PAN of the buyer and seller; particulars of transaction such as date of agreement, value of property, date and amount of tax deducted.

The good thing is that the tax so withheld could also be paid electronically by logging onto this website https://tin.egovnsdl. com/etaxnew/tdsnontds.jsp, selecting Form 26QB and following the instructions.

Ialso asked Joshi to check with his bank whether it would agree to deposit an amount equal to the withholding tax to the Government Treasury on his behalf and release the net instalment due to the seller. Joshi then shot the following questions at me:

Is this new provision (i. e., Section 194- IA of the Act) applicable to agreements entered into prior to June 1, 2013?

The new provision applies to agreements entered prior to June 1, 2013 (where the value of the immovable property is more than ₹ 50 lakh) only for payments made on or after June 1, 2013. The provision is applicable even if the payments to be made on or after June 1, 2013 are less than ₹ 50 lakh, when the overall consideration is more than ₹ 50 lakh.

Is the tax needed to be deducted on the entire amount at one time or on payment of instalments? The tax is required to be deducted on earlier payment or credit of such sum to the account of the seller. Thus, in payment by instalment, tax needed to be deducted at the time of every instalment.

Is the tax needed to be deducted on the amount paid towards indirect taxes (such as service tax, VAT, etc)?

Conservatively, tax is required to be deducted on the full sale consideration including the indirect tax component.

Is there any other provision which needs to be complied with in addition to payment of income tax in Form 26QB?

Yes, the purchaser (of the property) is required to issue to the seller a " certificate of tax deducted at source" in Form 16B, which can be downloaded from https:// www. tdscpc. gov. in/ after allowing the system about a week from payment in order to process the matter. Of course, one needs, however, to first register on this website.

Does this provisions apply to a non- resident Indian purchaser?

Yes. It applies to all persons purchasing such property from aresident seller.

By the time we had been thoroughly caffeinated, Joshi had come to the conclusion that the procedure would not be too difficult to implement.

Tax- at- source has to be deducted when you make payments to the seller for property worth over ₹ 50 lakh Non- deduction of tax at source when making payments to builders might attract penalties [1]

Buyers have to withhold tax at source even when the payment is made through housing finance companies

One does not require to have a tax- deduction account number to file taxes, but just has to fill the requisite challan

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.
Read more

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli
Read more

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis
Read more

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l
Read more

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now