Shopping for a home is a dream for a lot of. It’s a rollercoaster trip stuffed with feelings and happiness proper from the reserving till the ultimate possession of a dream home coupled with the stress of tax implications.There are lots of tax implications in shopping for a home with the introduction of Part 194IA of Earnings-tax Act, 1961, which was inserted by Finance Act, 2013 with impact from 1 June 2013. Previous to this modification, there have been obligations on the payer to deduct tax at supply on sure funds made to residents by the use of wage, curiosity, fee, brokerage, {and professional} providers, and so forth. When a non-resident transferred any immovable property, the transferee was required to withhold tax on such transaction by advantage of Part 195, which was relevant on all types of funds to non-residents within the nature of earnings. Nonetheless, there was no requirement to deduct tax on the switch of immovable property by a resident besides within the case of obligatory acquisition of sure immovable properties.
The insertion of Part 194IA within the Act, the place any resident transfers of any immovable property, aside from agricultural land, whose sale consideration is ₹50 lakh or extra, made it obligatory that the transferee could be required to withhold tax on the fee of 1% of such consideration. Immovable property for the aim of this part means any land (aside from agricultural land) or any constructing or a part of a constructing.The Union Funds 2022 has proposed amendments on this part, which offers that the transferee shall be required to deduct tax on the fee of 1% of the consideration (sale worth) or stamp responsibility worth (SDV) of the immovable property, whichever is larger. Additional, no deduction of tax shall be made by the transferee the place the consideration and the SDV of such property are each lower than ₹50 lakh.
This was proposed to be able to align the provisions of capital good points with TDS provisions. Part 50C of the act considers SDV adopted by the Stamp Valuation Authority (SVA) for the aim of levying stamp responsibility on properties and in case the sale consideration obtained from the client on sale of land or constructing or each is lower than worth adopted by stamp valuation authority, such worth adopted by SVA would develop into precise sale consideration. Nonetheless, the precise consideration shall be deemed to be the total worth of consideration the place the stamp responsibility valuation doesn’t exceed 110 % of the particular consideration.
Instance 1: Suppose A bought his property to B for the sale consideration of ₹49 lakh, and the SDV of the property was ₹60 lakh. Previous to the proposed modification, B wouldn’t be required to deduct tax at supply because the sale consideration of the property is lower than the edge restrict of ₹50 lakh prescribed in part 194IA. Nonetheless, submit modification in part 194IA, B shall be required to deduct tax at supply as it’s now required by the legislation to verify sale consideration obtained in addition to SDV of the property, individually. Although the sale consideration is lower than the edge restrict, the SDV exceeds the edge restrict of ₹50 lakh. Therefore, B shall be required to deduct tax on the fee of 1% of SDV, i.e., ₹60 lakh.
Instance 2: In instance 1, suppose the sale consideration is ₹52 lakh. Previous to the proposed modification, B would deduct tax on the fee of 1% of sale consideration. Nonetheless, whereas computing capital good points, A was required to take ₹60 lakh as the total worth of consideration because the distinction between SDV and consideration exceeds 10% of the consideration. With a purpose to deliver parity between Part 50C of the act and the availability of deduction of TDS, part 194IA has been proposed to be amended, and consequently, B shall now be required to withhold tax at supply on the upper of SDV and sale consideration.
Instance 3: In instance 1, suppose the sale consideration is ₹52 lakh, and the SDV of the property is ₹55 lakh. Earlier, B could be required to deduct tax at supply on ₹52 lakh and even Some time computing capital good points might take sale consideration as the total worth of consideration. Nonetheless, submit modification, B shall be required to contemplate larger of SDV and sale consideration for the aim of deducting tax. The aim of this modification is to assist in decreasing the tax leakages and black cash in any sort of immovable property transactions .
Amit Maheshwari is tax accomplice and AKM International, a tax and consulting agency with inputs from Yeeshu Sehgal, Tax Skilled, AKM International.
Supply: Live Mint