Land, one of the most priced of possessions in India is now an item subject to taxes. One already pays property tax, one might argue. We are referring here to Tax Deduction at Source (TDS) — Income Tax! Any transfer of an immovable property will now invite a tax deduction at source of one per cent on the value of the transfer if it is Rs. 50 lakh or more, according to the provisions of the Union Budget 2013, which has come into force with effect from June 1, 2013.
The objectives of this provision are multiple. — many significant transactions go unreported with neither the buyer nor the seller quoting a PAN and also the one per cent TDS on these transactions will address fiscal deficit by increasing revenue collection. While the objectives are commendable, the lay person is likely to face several questions such as — is TAN (Tax Deduction and Collection Account Number) required to comply with provisions, how does one issue TDS certificate to seller, filing of TDS returns, deposit of taxes and scrutiny from the TDS officer, etc.
The government has already started the process of simplification in the form of a simple challan where both, the transferor and the transferee details can be filled in along with other details of the property. Further, TAN requirement has been removed and the transferor will get credit of TDS on the basis of information furnished by transferee in the challan.
Taxes can be paid online as well as subsequently either through Internet banking or at an authorised bank branch. Taxes must be paid to the Central government within seven days from the end of the month in which the deduction is made. Now, to look at the flip side of this new provision — the onus of payment of taxes and furnishing the appropriate details has been squarely placed on the buyers and sellers concerned. But, who will ensure that it is deducted at source? Who will monitor whether this actually happens or not? There is no mandatory provision which will compel the buyer and seller to comply with TDS provisions before the registration of transfer of property. The Registrar too is not obliged to check whether taxes have been paid prior to the registration. If the buyer and seller fail to comply with the provision but still go ahead with the registration it will be an uphill task for the government and tax authorities to track the transaction, locate the defaulters and penalise them. If there is non compliance, the TDS can be recovered from the buyer as per the Income Tax laws and hence it will be safe bet for the buyer to comply with the provisions rather than risk non compliance. There is no clarification on sale of joint owners.
For example if three co-owners sell a property for Rs. 120 lakh, the current wordings do not require deduction of Tax at source.
G. Karthikeyan, a Coimbatore-based Chartered Accountant