TDS on Immovable Property (Sec 194-IA)

What is TDS on Immovable Property?

As per Finance Bill 2013 Buyer of Immovable Property (Other than rural agricultural land) is required to deduct tax on the rates applicable from the sales consideration payable to RESIDENT Transferor provided the sales consideration is equal to or more than Rs.50 Lacs.

What is the applicability of Section 194IA?

Section 194IA would be applicable if any of the following conditions are satisfied:

1.       If the transaction of sale is occurred on or after 1^st June 2013 & sales consideration is equal to or exceeding Rs. 50 Lacs.

OR

2.      If the advance consideration received before 1^st June 2013 is equal to or exceeding Rs. 50 Lacs but sale agreement is made after 1^st June 2013.

Whether Sec 194IA would be applicable on Non-Resident Indian [NRI]?

No, sec 194IA would not be applicable on Non Resident Indians [NRI’s]. For information on purchase of property from NRI’s, read our article here.

When is Tax to be deducted?

·         Tax shall be deducted at the time of payment or at the time of giving credit to transferor, whichever is earlier.

·         If any advance payment is being made, then tax is to be deducted at the time of such payment.

·         If the payment is made in installments then tax is to be deducted on payment of each installment.

What is the Rate at which the Tax is to be deducted?

The Tax is deductible @ 1% of the consideration payable to resident transferor [if valid PAN is quoted].

If the seller does not provide valid PAN, then the tax is deductible @ 20%.

What is the Due date for deposit of Tax Deducted?

The tax deducted is required to be deposited on 7^th of the following month in which the tax is deducted except for the tax deducted in the month of March. In case the tax is deducted in the month of March then due date for deposit is 30^th April.

How to Deposit the Tax deducted by the buyer?

The tax deducted is to be deposited by challan cum statement on Form 26QB. You can print the challan from here.

Whether the TDS is applicable if the Property is held by Joint Owners?

In case the property is held by joint owners, the provisions of Sec 194IA will still be applicable because the threshold limit of Rs. 50 Lacs is property-wise and not transferee-wise.

Whether PAN of Seller is mandatory?

Permanent Account Number (PAN) of the seller as well as buyer should be mandatorily furnished in the online Form for furnishing information regarding the sale transaction. If the PAN of seller is not filled or wrongly filled, then TDS would be deducted @20%.

What is the Procedure of depositing the Tax Deducted?

1.       The buyer has to fill the details of buyer and seller in Form No. 26QB.

2.       After that, the buyer has to remit the tax deducted electronically.

3.       On receipt of payment confirmation, a nine digit alpha numeric acknowledgement no. would be generated and such acknowledgement no. is to be kept by the buyer.

4.       On successful payment, a challan containing CIN and payment details would be generated. Print this as it will be required at the time of registration as Tax Payer.

What would be the implications if the Tax deducted is not deposited within due date?

In case of failure to deposit the tax deducted, interest and penalty would be levied on the purchaser.

Interest will be charged @ 1.5% per month or part of the month from the date of deduction to date of actual deposit. 

What is to be done after depositing the Tax deducted?

The buyer is required to issue Form No. 16B [TDS Certificate] to the seller of immovable property within fifteen days from the due date of deposit of tax, so that the seller would be able to take the credit of tax deducted.              

How to Download Form 16B?

Firstly the buyer is required to register himself as tax payer on TRACES [https://www.tdscpc.gov.in/]

The tutorial for registering on traces can be downloaded here.

The tutorial for downloading Form 16B can be downloaded from here.

What information is required for registration as Tax Payer on TRACES?

1)      PAN of Buyer

2)      Date of Birth/Date of Incorporation of Buyer

3)      Name of Buyer [Complete name including surname]

4)      Particulars of Tax Deducted*

(a)    TAN of Deductor

(b)   Type of Deduction

(c)    Month & Year of Deduction

(d)   TDS/TCS Amount

5)      Particulars of Challan Deposited*

(a)    Asst. Year in which Challan is deposited

(b)   Challan serial No.

(c)    Amount of Challan Deposited

6)      Complete Address of Buyer

7)      Mobile & Email id of Buyer

* The assessee may provide information for either Point 4 or 5.

What is the Information required to download Form 16B [TDS Certificate]? 

1)      User ID & Password of Tax payer

2)      TAN/PAN of Tax payer

3)      Acknowledgement No. of Buyer

4)      PAN of Seller

What is the Password to Open Form 16B?

The Password to Open Form 16B is Date of Birth/Date of Incorporation of Buyer.

- Contributed by Ms. Shiwali Shukla (Article Assistant)

Advance Tax Date Extended to 17th December 2013

The December instalment of Advance tax is required to be paid on or before 15th December, 2013 by the tax payers who are liable to pay advance tax. These taxpayers can make payments in the designated branches of the authorized banks, electronically or physically, as per law. The banks are closed on 15th December, 2013, being a Sunday. Accordingly, to facilitate payment of this instalment of Advance tax for the Financial year 2013-14, the Central Board of Direct taxes (CBDT) has issued an order to extend the time limit to make such payments of Advance Tax, from 15th December, 2013 to 17th December, 2013. Taxpayers, therefore, can now pay their advance tax instalment by 17th December, 2013 without entailing any consequential interest for deferment.

Gurgaon Property Tax Calculator & Form

The Municipal Corporation of Gurgaon saw a huge rush at their office on 10th December, 2013, which was the last day to pay property tax and avail a rebate of 30%.

To ease the pressure and give Gurgaon residents some more time to pay their taxes, the MCG extended the Property Tax deadline to 31st December, 2013.

You can calculate your property tax and pay the same using the following tools and links:
1. Gurgaon Property Tax Calculator
2. Property Tax Rates
3. Property Tax Form in pdf
4. Property Tax form in doc

Mr. Sandeep Ahuja as Guest Speaker at Amity Law School, Noida

Amity Law School, Noida organized a workshop on Legal Entrepreneurship, initiated by the Ministry of Corporate Affairs on 26th February, 2013. The workshop was held to spread awareness among the students about investor protection measures in the financial markets, and to generate their interest in the field of taxation laws' practice.

Mr. Sandeep Ahuja was the guest speaker for the occasion and threw light on various provisions of the Direct Tax Laws, focusing on the scope of practice available in the field of direct taxation. He also answered queries related to investments and tax planning options available in the Income Tax laws.

Mr. Rajiv Bajaj, CFO of Panasonic AVC Networks India Co. Ltd. also spoke on the occasion about the various modes of raising finance in the Indian financial markets.

Image courtesy: www.amity.edu

Loan to Directors: Section 185 of Companies Act 2013

Section 185 of the Companies Act, 2013

Applicable from: 12^th September, 2013

Corresponding to: Section 295 of the Companies Act, 1956

Related to: Loan to Directors

Applicability: Both public and private limited companies

No company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person.

Therefore, no loan can be advanced by a company to the following persons:

-          Director

-          Director of Holding or Subsidiary company

-          Partner or relative of any such Director

-          Any firm in which such Director or relative is partner

-          Any other company in which such Director is a Director

-      Any company or LLP in which not less than 25% of the total voting power may be exercised individually or jointly by any such Director(s)

-     Any company or LLP, the Board of Directors of which is controlled by any of the Directors of the lending company

Exemptions:

-          Loans to Managing Director in accordance with the terms of his appointment

-        Loans to Director as a part of loan to employees in accordance with the conditions of service applicable to all employees of the company

-          Loan pursuant to any scheme approved by the members vide special resolution

-        A company which provides loans in the ordinary course of business and interest in respect of such loans is charged at a rate not less than the bank rate declared by RBI

Penalties:

-        The company shall be punishable with fine which shall not be less than Rs. 5 lakh but may extend to Rs. 25 Lakhs

-     The Director or the other person to whom any loan is advanced or guarantee or security is given or provided in connection with any loan taken by him or the other person, shall be punishable with imprisonment which may extend to 6 months or with fine which shall not be less than Rs. 5 Lakhs but may extend to Rs. 25 Lakhs, or with both

Note: Meaning of Relative: spouse, lateral ascendants up to two levels i.e. father (including step father) and grandfather, mother and grandmother; lateral descendants on the son’s side up to two levels i.e son and son’s children, daughter (including step daughter), her husband and siblings.

Registers to be Maintained under the Payment of Bonus Act, 1965

Every employer is required to maintain the following registers in the prescribed form:

1. Register showing the computation of allocable surplus (Form A)
2. Register showing the set-on and set-off of the allocable surplus (Form B)
3. Register showing the details of the amount of bonus payable to each of employees, the amount of deductions if any, and the amount actually paid. (Form C)

The employer is also required to send an annual return to the Inspector appointed under the Act within 30 days from the expiry of time limit specified in Section 19 for payment of bonus. (Form D)

TDS on Purchase of Property from NRI

In case of  NRI (Non-Residents of India), TDS is explained as per section 195 of the Income Tax act  which says  any person responsible for paying a sum to a non-resident, not being a company, or to a foreign company, any interest (not being interest on securities) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head “Salaries” shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force .

Therefore, the buyer of the property needs to deduct tax.

The important phrase in the section is “sum chargeable under the provisions of the Act”. This means that whatever be the amount paid, buyer has to deduct tax on that sum, not the profit earned by the seller on it. In other words, buyer cannot compute the Long term or short term capital gain and deduct the tax due on it.  The liability to deduct tax is on the gross amount paid.

As per Sec 195, tax has to be deducted at the ‘rates in force’. ‘Rates in force’ is defined u/s 2(37A)(iii) as the rate specified in the Finance Act. Currently the effective rate for long term capital gains is 20% + surcharge (if applicable) + E. Cess and SHE. Cess.

If there is no capital gain at all in the transaction or the tax payable on capital gain is less that the TDS deducted, then the payer can approach the assessing officer and get a certificate of lower or nil deduction of TDS. This is provided in subsection (2) of Section 195. Alternatively, u/s 195(3), payee also can approach the AO (Assessing Office) and get the certificate. If such certificate is not obtained, the payer has to deduct tax, even in case where the property is sold at a loss.

There are certain instances under section 54 in which NRIs can get a waiver of TDS. One such case would be if the NRI is planning to reinvest the capital gains of the property in another property or in tax exempt bonds. In such cases, the NRI will be exempt from tax in India, and no TDS will be deducted either.

NRIs selling their properties can apply to the income tax authorities for a tax exemption certificate under section 195 of the Income Tax Act. They must make this application in the same jurisdiction that their PAN (permanent account number) belongs to and will be required to show proof of reinvestment of capital gains. If the NRI is planning to buy another house, the allotment letter or payment receipt will need to be produced; if capital gains bonds are chosen instead, an affidavit to this effect will have to be prepared. Usually, buyers withhold the last instalment of payment until the NRI produces a certificate of exemption. A NRI has up to two years from the date of sale to invest in another property, or up to six months to invest in bonds.

The purchaser, before deducting income tax from such payment, should apply for and get a Tax deduction Account Number (TAN) as per section 203A of the Income Tax Act 1961. He must collect the Permanent Account Number (PAN) of the said Non-resident Indian before deducting the tax. The buyer should deposit, (by using challan for payment of TDS), the income tax so deducted, with the government (through banks authorized to collect direct taxes) within seven days from the end of the month in which such tax is deducted and then file the TDS return.

The new provision requires TDS to be deducted at 1% of the price being paid by the purchaser of an immovable property, irrespective of the quantum of capital gains. However, where the seller is a non-resident, these provisions would not apply, and the earlier TDS provisions applicable to purchase of property from non-residents would continue to be applicable.

POINTS TO REMEMBER FOR PREPARATION OF TDS RETURN ( AS AMENDED )

The due date of filing of quarterly TDS statement for second quarter of FY 2013-14 is 15th October

Keep note of the following facts before preparation of the quarterly TDS statement:

·         CORRECT REPORTING: it is very important to report correct and valid particulars PAN of the deductees and other particulars of deduction of tax as Cancellation of TDS statement and deductee row is no longer permissible.

·         Quote correct and valid lower rate TDS certificate in TDS statement wherever the TDS has been deducted at lower/zero rate on the basis of certificate issued by the Assessing Officer

·         It is mandatory to quote the last accepted provisional receipt number of the regular quarterly TDS/TCS statement of any form.

·         TDS statement can not be filed without quoting any valid challan and deductee row.

·         Late filing fee, being statutory in nature, can not be waived.

·         Validate PAN and Name for old as well as new deductees from TRACES and use the same to file new statement to avoid quoting of incorrect and invalid PAN.

·         Download TDS certificate from TRACES bearing unique TDS certificate number and issue to the taxpayers within due date.

·         File correction statements promptly in case of incomplete and incorrect reporting.

·         Download the justification report to know the details of TDS defaults, if any, on processing of TDS statement 

Compliance Calendar: September 2013

Date	Statutory Act	Applicable Form	Obligation
05/09/13	Service Tax	Challan No.GAR-7	Monthly payment of service tax for assessee other than individual, Proprietorship Firm. (6th Sep in case of e-payment) Provision: Rule 6
05/09/13	Central Excise	Challan No.GAR-7	Monthly Payment of Central Excise Duties for August. (6th Sep in case of e-payment) Provision: Rule 8(1)
07/09/13	Income Tax	Challan No.ITNS-281/17	Payment of TDS/TCS deducted/collected in August. Provision: Rule 30(2) and Rule 37CA
07/09/13	Income Tax	Form No. 27C	Late Payment of submission of declaration i.e. for no TCS obtained from manufacturer to the IT commissioner. Provision: Rule 37C
07/09/13	Income Tax	Form No.15G,15H, 27C	Submission of Forms received in August to IT Commissioner. Provision: Rule 29C
10/09/13	Excise	ER-1	Return for Non SSI assessees for August. Provision: Rule 12(1)
10/09/13	Excise	ER-2	Return for EOUs for August. Provision: Rule 17(3)
10/09/13	Excise	ER-6	Return by units paying duty > 1 crore (CENVAT + PLA) for August. Provision: Rule 9A(3)
15/09/13	Service Tax	ST-3	Extended date of Service Tax  Return for the period from 1.10.2012 to 31.03.2013
15/09/13	Provident Fund	Electronic Challan Cum Return(ECR)	E-Payment of PF for August (Cheques to be cleared by 20th)
15/09/13	ESI	ESI Challan	Payment of ESI of August
15/09/13	Income Tax	ITNS-280	Payment of Advance Income Tax in case of company/non corporate assessee. Provision: Chapter XVII Part C
15/09/13	D-VAT	DVAT- 20	Deposit of DVAT TDS for August Provision: Rule 59(1)
15/09/13	D-VAT	DVAT – 43	Issue of DVAT certificate for deduction made in August Provision: Rule 59(2)
16/09/13	PF ESI		Monthly Payment of ESI Contribution for August (Cheques to be cleared by 20th)
21/09/13	D-VAT	DVAT-20	Deposit of VAT for August Provision: Rule 31
25/09/13	D-VAT	Form 16 and CST 1	E- Return of VAT for Aug for dealers having monthly Tax Period Provision: Not. No. F. 7(7)/POLICY-III/VAT/2005-06/3671
25/09/13	EPF,ESI		Monthly - Consolidated Statement of dues and remittance under EPF, EPS and Employees' Deposit Linked Insurance Scheme, 1976 for the month of August to which the dues relate.
28/09/13	D-VAT	DVAT-16/Form-1 & Ack	Last date for Monthly Return (Hard Copy of e-Filing) of VAT & CST for the month of August. Provision: Rule 28
30/09/13	Income Tax	ITNS-280	Deposit of Income Tax – Self assessment tax Provision: 140A
30/09/13	Income Tax	DVAT-51	Quarterly Reconciliation Return for transaction under CST Act Provision: Rule 67(1)
30/09/13	Income Tax	ITR-1 to 8 &  ITR-V	Last date of filing return in case of assessee whose accounts are required to be audited, or working partner of a firm whose accounts are required to be audited, or Companies Provision: Section 139