TDS Provisions For Transfer Of Immovable Property

The new provisions under the Income Tax Act, 1961 state that a prospective buyer of immovable property will have to deduct tax at source in case of transactions of Rs 50 lakh upwards.

Q 1) I have a residential flat that I had purchased way back in 2002 for Rs 3000000 and wish to sell the same now. The expected market price is about Rs 10000000, and I am planning to invest the entire sale proceeds in the acquisition of a new residential flat. I have been informed that I am not required to pay any taxes on the transaction as I am investing the entire sale proceeds in the acquisition of a new flat.

The prospective buyer is a salaried employee. However, he tells me that he is going to deduct TDS on the sale proceeds due to me on the sale of the said residential flat. How can he do so if he is a salaried employee? Moreover, what is the rate of TDS that he will apply?

- Shail Deora

As per the new provisions u/s 194IA of the Income Tax Act, 1961, w.e.f. June 1, 2013, a transferee shall deduct an amount equal to one per cent of the consideration for transfer of any immoveable property (other than agricultural land), paid/payable to the resident transferor at the time of credit or payment, whichever is earlier. Thus, the prospective buyer will have to deduct tax at source. However, no such deduction is required to be made if the consideration for such transfer is less than Rs 50 lakh.

In your case, the consideration being higher than the limit specified, the provisions of the new section will be applicable. In fact, if you do not provide your correct PAN, the prospective buyer is required to deduct at the rate of 20 per cent (and not one per cent as stated above) of the consideration for such transfer of immoveable property. The Central Board of Direct Taxes has notified the new procedure for such deduction even if the transferee does not have a TAN (TDS Account Number).

Q 2) I have omitted to file my return of income for the year ended March 31, 2012. What are the consequences of not filing one’s tax returns for a year? What if I miss the last date of filing my return this year too?

- Radhika Tomar

You have not stated what category of assessee you are and which due date of filing the return of income is applicable to you. U/s 139 of the Income Tax Act, 1961 the due date for filing the return of income is as follows:

A. For individuals whose accounts (or the accounts of the firm in which such individual is a partner) are required to be audited under the Income Tax Act, 1961, the due date for filing of return is September 30 after the end of the financial year. Thus, for the FY2011-12, the due date would be September 30, 2012.

B. For individuals not covered by (A) above, the due date for filing of return is July 31 after the end of the financial year.

In case you have not filed your return for FY2011-12 before the due date of filing the return, the consequences are:

a) Apart from interest u/s 234B and 234C for deferment of tax and advance tax, interest u/s 234A of the Income Tax Act, 1961 at the rate of one per cent per month or part thereof, in case tax is payable, till the return is filed by you.

b) If the return of income is not filed before the end of the relevant assessment year, that is to say on or before March 31, 2013, a penalty of Rs 5000 u/s 271F of the said Act, levied by the Assessing Officer, will be payable.

c) Further, the return of income cannot be filed without the approval of the Assessing Officer on or after April 1, 2014. Besides, the Assessing Officer having jurisdiction may require you to file the return. In case you do not provide the details as required, the Assessing Officer can also pass an ex-parte order called the Best Judgement Assessment u/s 144 of the said Act.

As regards the returns for FY2012-13, the same provisions would apply:

(i) Apart from interest u/s 234B and 234C for deferment of tax and advance tax, interest u/s 234A of the Income Tax Act, 1961 at the rate of one per cent per month or part thereof, in case tax is payable, till the return is filed by you.

(ii) If the return of income is not filed before the end of the relevant assessment year, that is to say on or before March 31, 2014, a penalty of Rs 5000 u/s 271F of the said Act, levied by the Assessing Officer, will be payable.

(iii) Further, the return of income cannot be filed without the approval of the Assessing Officer on or after April 1, 2015. Besides, the Assessing Officer having jurisdiction may require you to file the return. In case you do not provide the details as required, the Assessing Officer can also pass an ex-parte order called the Best Judgement Assessment u/s 144 of the said Act.