The note discusses few aspects to be checked by the Buyer of
Immovable property. We will focus on the purchase of Flat
or Office space
or Land (Non-Agricultural)
Part I – Whether
“Capital Asset”? [Sec 2(14)]
i)
Flat or Office space or
Land (Non-Agricultural – N.A) is “Capital Asset” under Sec 2(14)
of Income tax Act 1961.
ii)
Buyer may be salaried
individual but if he buys a flat or plot of land then such flat or plot of land is held as “Capital
Asset”. Benefit is that on sale / transfer of this property the seller
will get benefit of indexation under Sec 48 of Income
Tax Act.
Part II – Buyer should
check Stamp Duty Value of Flat or Office space or Land (NA): Sec 56(2)(x)(b)
In case a person buys immovable property wherein the
Stamp duty value (SDV) is exceeding the consideration
and such excess is more than higher of the following amounts:
i)
Rs 50,000
and
ii)
Amount
equal to 10% of Consideration
then such excess will be chargeable to tax under
“Income from Other Sources” Ex:
Stamp Duty Value – 50 Lacs.
Consideration – Rs 43
Lacs.
Here Stamp duty value exceeds consideration by 7
Lacs and this amount exceeds Rs 50,000 as
well as Rs 4.3 Lacs (10% of Consideration). Hence the excess amount of Rs 7
Lacs will be charged to buyer
for income tax under
the head “Income from other sources”.
This provision
also applies to flats purchased in resale as well as new flats from builders.
Part III –
Buyer should deduct tax at 1% of consideration under Sec 194-IA
Buyer of immovable property is liable to deduct tax
at 1% of Consideration under Sec 194- IA when transferor
is resident under Income
Tax Act.
a)
Tax not to be deducted
in following cases:
i)
Consideration for immovable property
transferred is less than Rs 50 Lacs
ii)
Immovable property transferred is rural agricultural land
b)
Rate
of TDS - 1% with no surcharge or health and
education cess. In case seller does not provide
PAN then TDS Rate will be
20%.
c) When
to deduct tax:
Tax is to be deposited at the time of credit of sum
amount to account of transferor or at time of payment whichever is earlier.
d)
Rate
of TDS – 1% with no surcharge or health and
education cess. In case seller does not provide
PAN then TDS Rate will be 20%
e)
Builders charge
consideration under different heads from buyers. Meaning of Consideration of Immovable property includes
club membership fees, car parking fees,
maintenance charges, electricity or water facility fees, charges of similar
nature incidental to transfer.
f)
Whether
flat buyer is required to take TAN (Tax Deduction Account Number) – NO
g)
Challan
cum statement is in Form 26QB and this is to be filed
electronically by buyer.
h)
Tax shall be deposited
within 30 days from end of the month in which deduction is made. Online payment of TDS
is mandatory.
i)
Person responsible for
deducting tax (Buyer of immovable property) shall furnish certificate in Form 16B to the seller of immovable property
Part IV – Taking
Possession Letter from Real Estate Developer/seller
This is important for Individual for claiming two deductions:
a)
Sec 80C(xvi)
– Repayment of Housing
Loan to banks
Deduction of principal repayment can be claimed as
deduction under Sec 80C only if income
from such residential house property is chargeable under “Income from House Property”.
Its advisable to have possession letter from builder
so that deduction of principal repayment
can be taken ahead from
possession date under
Sec 80C.
b)
Sec 24b – Interest
on Housing Loan
The FY in which housing property is acquired or
constructed is the FY from which interest
can be taken as deduction. Example: If possession letter is dated 31st March 21 then interest
on housing loan from FY
20-21 onwards can be claimed.
Interest prior to completion certificate is
preconstruction period interest and allowed
as deduction in 5 equal
installments.
No comments:
Post a Comment