Income Tax--Current Issues

Practice Update

V.K. Subramani

SCOPE OF TAX DEDUCTION UNDER SECTION 194-IA

Tax deduction at source is a very effective mechanism for the tax administration to initiate the process for proper tax assessment as it creates a credible trail for follow up. When any person including persons having salary income acquire any immovable property (Other than rural agricultural land) this provision would get triggered. However, only when the consideration exceeds Rs. 50 lakhs, tax deduction has to be made @ 1%. The term 'immovable property' would mean any land (other than agricultural land) or any building or part of a building. The point of time for tax deduction is at the time of credit of such sum to the account of transferor (this is applicable in the case of persons maintaining books of account i.e. having income from PGBP or other sources) or at the time of payment, whichever is earlier.

The amount of tax deducted by the buyer must be paid within 30 days from the end of the month in which the tax deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QB. The certificate of tax deduction in Form No16B could be downloaded within 15 days from the due date of furnishing the challan-cum-statement in Form No. 26QB for furnishing the same to the payee. The buyer of such immovable property is not required to obtain TAN.

Tax deduction will not apply to acquisition of rural agricultural land. For this purpose, reference is required to be made to section 2(14) to note that rural agricultural land or those which are not 'capital asset', do not attract tax deduction at source under section 194-IA.

The transferor (vendor) has to accept the sale consideration only through banking channel to avoid being caught within the mischief of section 269SS/269ST. Yet another aspect to be considered in this regard is the meaning of the term 'consideration for immovable property'. It includes club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges, which are incidental to the transfer of immovable property.