TDS on Purchase of Property From Builder

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TDS on Purchase of Property From Builder

In order to check the rampant use of black money in immovable property transactions, the government of India has introduced a law, wherein, the purchaser of a property has to deduct tax at source, while paying the seller for his property.

Properties that are covered

Section 194I A of Income Tax Act, requires a buyer to deduct tax at the rate of 1% of the sale consideration, if the value of the transaction is Rs 50 lakhs or more. This section covers residential property, commercial property, as well as land. However, transactions pertaining to the purchase of agricultural land, are not covered under this provision.

When to deduct the TDS and how to pay it

The purchaser of the property has to deduct the TDS, either at the time of executing the conveyance deed, or at the time of payment of advance in case any advance is being paid before the execution of the conveyance deed. The buyer has to deposit the TDS amount to the credit of the central government, within 30 days from end of  the next month in which the tax is so deducted. For payment of the TDS and furnishing other particulars, you have to fill in Form-cum-challan No 26QB. If a property has more than one buyer and/or seller, you need to fill in separate Form 26QB for each set of buyer and seller. The details of all buyers and sellers, have to be submitted in each Form 26QB.

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Details required for payment of the TDS

It is the buyer who has to comply with the requirement of deducting TDS and paying the amount to the central government. Detailed instructions for filling up the form and payment of tax can be found at the following link: http://www.incometaxindia.gov.in/Pages/tds-sale-of-immovable-property.aspx

Generally, every person who is responsible for deducting TDS has to obtain a TAN (tax deduction account number). However, in case of TDS on immovable property, the buyer does not have to obtain the TAN. You need to provide details like name, address, PAN, mobile number and email id of the seller as well as buyer, in Form 26QB. You also need to provide the complete address of the property, along with the date of agreement, total value of consideration, date of payment, etc.

The buyer should ensure that the PAN of the seller is correct. Otherwise, the seller will not be able to get the credit for tax deducted by the buyer, as the credit shall flow on the basis of PAN card details furnished in Form 26QB.

The TDS can be paid online or deposited offline, by tendering the physical challan to an authorised bank. The bank will then update the details on the income tax department’s website. Once the TDS has been deposited, the buyer has to download the TDS certificate in Form No 16B, from the website of the Income Tax Department and furnish it to the seller within 15 days.

Lower deduction or nil deduction of TDS

Some TDS provisions provide for the payee to either approach the income tax officer for issue of a certificate, so that the payer shall deduct tax at a lower rate or nil rate, or in some cases the payee can just furnish a declaration for nil TDS. However, there is no such provision for TDS on immovable property. The buyer has to mandatorily deduct tax at source, where the consideration exceeds Rs 50 lakhs, in respect of each set of buyer and seller.

Punjab abolishes 2% Stamp Duty Tax

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CHANDIGARH: With a view to boost the real estate sector, the Punjab Cabinet decided to abolish the stamp duty of two per cent levied on immovable property while awarding the power of attorney.

A decision to this effect was taken by the Cabinet in a meeting held under the chairmanship of chief minister Parkash Singh Badal here.

Speaking on the matter, a spokesperson of the chief minister’s Office said the decision would be a major relief for people aspiring to buy their own houses.

The stamp duty would now be a nominal Rs 1000 on the General Power of Attorney and Rs 500 on Special Power of Attorney, irrespective of the market value.

In another major decision, Cabinet decided in principle to offer the proprietary rights under concessional terms and conditions to the small and marginal agricultural farmers cultivating up to five acres of provincial government agricultural land.

These tillers who have been cultivating government land for at least 20 years would be entitled to allotment at significant discount from the collector rates.

The Cabinet also gave nod for appointing Senior Vice President in the various boards and corporations from among the non-official members.

Following this decision, the Cabinet approved the creation of post of Senior Vice Chairman in Punjab State Board of Technical Education and Industrial Training and Punjab Khadi & Village Industries Board.

It was also decided in the meeting to constitute a Cabinet sub committee comprising Food and Civil Supplies Minister and Finance Minister to negotiate with banks for a lower rate of interest on previous loan accounts.

The Cabinet also approved the proposal mooted by the local government department to make suitable amendment in the Punjab Municipal Act, 1911 and the Punjab Municipal Corporation Act, 1976 for the disposal of Municipal properties under possession of occupiers for a period of twenty years or more.

In the meeting, the Cabinet also decided to make amendments in the rates of property tax of hotels in the urban areas from the year 2015-16 by including this type in the category of commercial property.

GST Notification Doesn’t End Govt’s Power To Levy Excise

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gst

After a hectic day of parleys and opinion from the attorney general, the government feels it retains power to levy excise duty on goods other than petroleum even after the provision of the Constitution amendment law was notified on September 16.

A top government source told ET that transitional amendment in the Constitution (122nd Amendment) (GST) Act, 2014, to roll out the goods and services tax (GST) would tax (GST) would provide cover to the government till the time this reform is implemented.

“We have had discussion with AG and he opined that there is no problem with the notification,” the official said citing Section 19 of the amendment.

This provision says: “Notwithstanding anything in this Act, any provision of any law relating to tax on goods or services or on both in force in any state immediately before the commencement of this Act, which is inconsistent with the provisions of the Constitution as amended by this Act, shall continue to be in force until amended or repealed by a competent legislature or other competent authority or until expiration of one year from such commencement, whichever is earlier.”

The official said there are some constituents that need to be seen in the notification.

Firstly, the Section 19 says tax on goods and services to be tax ed in any `state’, which refers to geographic entity of state and not by states. Secondly, withdrawal of power to levy tax lies with the competent authority and not the state legislature.

This protects the power to impose central levy during the transitional period of one year.

Revenue secretary Hasmukh Adhia tweeted: “The department of Revenue examined the validity and implications of notfns dated 10th and 16th Sept wrt existing taxes imposed by the Union and states. “There is no legal infirmity in these notifications. Law dept has confirmed that there appears to be no legal requirement to issue any further clarification or notification in this regard.”

ET had reported on Monday that massive confusion had arisen after the Centre notified certain provisions in the constitution amendment law for GST with effect from September 16.

The notification said the government will not levy excise on goods other than petroleum products from this date, implying loss of power to tax other goods.The notification also binds states to accept GST within a year or they will lose power to tax.

The Constitution (122nd Amendment) (GST) Act, 2014, passed by Parliament last month to roll out GST, has made changes in Entry 84 of List 1 or the Union List of the 7th Schedule of the Constitution.

Essentially, the amended list provides that excise duty can be levied only on petroleum and its products and tobacco and tobacco products, thereby limiting Central Excise Act’s scope to these specified products.

Experts felt through this notification the government had surrendered power to levy excise except in goods mentioned.

Stamp Duty And Tax On Gift Deed Of Property

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Gifting is an act, through which a person voluntarily transfers certain rights in an asset to another person, without any consideration. Gifting of a house property, has certain income tax and stamp duty implications.

Legal requirements for gift

As per the Transfer of Property Act, the transfer of a house property under a gift, has to be effected by a registered instrument/document, signed by or on behalf of the person gifting the property and should also be attested by at least two witnesses. The registrar shall ensure that proper stamp duty has been affixed on the gift deed/document, when it is presented for registration. The amount of stamp duty and registration charges payable, with respect to a gift deed, are generally the same as in the case of a regular sale. However, if the gift deed is executed between some specified close relatives, some states provide concessions in stamp duty. For example, Maharashtra used to have a cap on stamp duty payable on gift of a residential or agricultural property to one’s spouse, children, grandchildren or wife of a son who has died, at Rs 200, till May 16, 2017. Now, the stamp duty applicable is three per cent of the market value of the transaction.

Income tax implication

According to income tax laws, the value of all the gifts received by a person during a year is fully exempt, as long as the total of such gifts does not exceed Rs 50,000 in a year. If the value of all the gifts taken together exceeds Rs 50,000, then, the aggregate of the gifts received become taxable without any threshold exemption. However, income tax laws also give a favourable treatment, to gifts between two close relatives. Consequently, the gift of any asset (whether movable or immovable) made to certain specified relatives, is fully exempt from tax in the hand of the recipient, without any upper limit. The list of close relatives includes parents, spouse, siblings, siblings of the spouse, lineal ascendants and descendants of the person and his/her spouse. The list also includes spouse of the abovementioned persons.

If the house property is received as a gift from a relative, the first incidence of tax will arise, when you sell the property. The cost for the purpose of income tax, shall be the taken as the cost that was paid for the property by any of the previous owners. The profits shall be treated as short-term or long-term, depending on whether the aggregate of your holding period as well as that of the previous owner who had actually paid for it, is more than 36 months or not.

If the holding period as computed above is less than 36 months, the profit accrued on the sale of such property, shall be treated as short-term and will be added to your regular income and taxed at the applicable slab rate. However, if the holding period is more than 36 months, you will get the benefit of indexation on the cost of the property, as well as the option to claim exemption from payment of 20% long-term capital gains tax, by investing in a residential house or in capital gains bonds of Rural Electrification Corporation (REC) or National Highway Authority of India (NHAI).

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