Introducing TDS on Immovable Property

How to calculate TDS on property
How to calculate TDS on property

WE have already experience TDS bracket get widened  over the period of years for financial transactions  from Salary, Commission, Consultancy, Contract, Rent, Interest and so on… Now from Budget 2013, under section 194IA, one more financial transaction added to this and it is Sale – Purchase of Immovable Property. Also note that, Capital Gain tax and TDS on Immovable property is two different aspects

Any person purchasing immovable property of Rs. 50 lacs or more not being Agriculture Land has to deduct TDS @ 1% from the price of immovable property paid to seller.  As all processing of TDS is centralized, lets take a look on details of this provision.

TDS applicable on which property?

Applicable to – Immovable property of Rs. 50 lacs or above

Not Applicable to – i) Agriculture Land and ii) Immovable Property having value less than Rs. 50 lacs

Who is liable to pay TDS?

Mainly there are two parties – i) Buyer of Property and ii) Seller of Property. The responsibility to deduct TDS is on Buyer of the Property.

How much TDS ?

1% on the  Total Price of the Property

From when TDS on Immovable Property  applicable?

It is applicable from 1st June 2013.

What Buyer of the Property has to do?

1) Deduct TDS on payment made to Seller of the Property

2) Take the PAN of Seller and compare the same with original Permanent Account Number PAN card

3)  e-Payment of TDS  though online form  (e-payment of TDS is compulsory. If buyer does not have facility to pay online, he can go to any authorized bank and pay thought them)

4) File online form 26QB providing details of deal of the property.

5) If TDS is not deposited withing 7 days of filling of Form 26QB, already filled Form26QB will consider invalid and one has to  file it again.

6) Download TDS certificate from traces website, and give it to Seller of the property.

What Seller of the property has to do?

1) Give valid PAN to Buyer of the property to quote.

2) Check TDS credit in form 26AS from here.

Is TAN required ?

No, absolutely not. It is not compulsory to take TAN by Buyer of the property.

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BOCW Act, Labour Welfare cess and its applicability and implications for construction industry

By Ravish Bhatt

The construction industry in India is witnessing a rapid development owing to needs of better public infrastructure, commercial space, need of more number of residential buildings to accommodate those who migrate from towns/villages to larger cities.  Although construction of buildings is believed to be driven by employment of latest technology, machines etc., the work is at the very grass root level done by the building workers/laborers and for their safety and welfare the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (BOCW Act) stipulates the welfare measures  and the Building and Other Construction Workers Welfare Cess Act, 1996, (Cess Act) has been enacted for levy and collection of cess on the ‘cost of construction’ incurred, from the ‘employer’  for use for the welfare of construction workers who are registered with the respective state.

As the acts impose obligations upon developers, employers and give powers to authorities under the act to take effective steps for ensuring compliance, it is essential for the developers, employers and contractors in the business of construction to be aware of the applicability and implications of the act.  The major requirements with respect to liability of payment of cess and registration mandated under the acts and consequences of breach thereof are highlighted in this article.

APPLICABILITY OF ACTS  AND LIABILITY TO PAY CESS     

The acts apply to ever ‘establishment’ employing ten or more than ten ‘building workers’ in any ‘building or other construction work’ anytime during the preceding twelve months.   BOCW ACT requires that employer of establishment must apply to registering officer for registration of establishment within sixty days from the date of commencement of construction work and CESS ACT prescribes payment of cess of 1% of the cost of construction by the employer.

The relevant definitions of ’employer’ , ‘establishment’ , ‘building worker’ etc are reproduced hereunder for ready reference.

“building or other construction work” means the construction, alteration, repairs, maintenance or demolition of or in relation to, buildings, streets, roads, railways, tramways, airfields, irrigation, drainage, embankment and navigation works, flood control works (including storm water drainage works), generation, transmission and distribution of power, waterworks (including channels for distribution of water), oil and gas installations, electric lines, wireless, radio, television, telephone, telegraph and overseas communications, dams, canals, reservoirs, watercourses, tunnels, bridges, viaducts, aqueducts, pipelines, towers, cooling towers, transmission towers and such other work as may be specified in this behalf by the appropriate Government, by notification but does not include any building or any construction work to which the provisions of the Factory Act, 1948 (63 of 1948), or the Mines Act, 1952 (35 of 1952), apply;

“contractor” means a person who undertakes to produce a given result for any establishment, other than a mere supply of goods or articles of manufacture, by the employment of building workers or who supplies building workers for any work of the establishment, and includes a sub-contractor;

“employer”, in relation to an establishment, means the owner thereof, and includes,-

(i) in relation to a building or other construction work carried on by or under the authority of any department of the Government, directly without any contractor, the authority specified in this behalf, or where no authority is specified, the head of the department;

(ii) in relation to a building or other construction work carried on by or on behalf of a local authority or other establishment, directly without any contractor, the chief executive officer of that authority or establishment;

(iii) in relation to a building or other construction work carried on by or through a contractor, or by the employment of building workers supplied by a contractor, the contractor;

(j) “establishment” means any establishment belonging to, or under the control of, Government, by body corporate or firm, an individual or association or other body individuals which or who employs building workers in any building or other construction work; and includes an establishment belonging to a contractor, but does not include an individual who employs such workers in any building or construction work in the relation to his own residence the total cost of such construction not being more than rupees ten lakhs;

Liability to pay cess would be that of employer and as per the definitions referred to above, the employer in relation to an establishment  would mean  the owner thereof and would include the contractor in case where the building or other construction work is carried on by or through a contractor.

Section 3 of CESS act doesn’t specifically state as to whether cess is required to b paid by owner or contractor for a particular establishment.  However, in the case of Delhi Metro Rail Corporation, it has been held by High Court that there is nothing wrong in deduction of the amount of cess from the bills of the contractor.  There can be a deduction of cess at source without prior assessment so long as it remains adjustable against any final liability that may be determined at the end of the assessement. In Gannon Dunkerley and Co. Ltd. -vs- State of Madhya Pradesh, reported as 2009 (5) MPHT 258, a Single Judge of the Madhya Pradesh High Court at Jabalpur, dealing with the issue of interpretation of the expression „employer‟ in the Cess Act and the Cess Rules, held that “the intention of the

Legislature is, therefore, not only to include the owner of the establishment in the present case the Company but also the Contractors who carries out the work of building or other construction work and is an employer for the purpose of the Construction Workers Act, 1996 and the Cess Act, 1996. Thus, there is no escape for the contractors who have undertaken the building and other construction work in the establishment belonging to the Company”.

All in all, the owner/employer/contractor would be justified in defining the liability by way of a contractual agreement between the employer and contractor.

CONSEQUENCES OF DELAY/FAILURE IN PAYMENT OF CESS OR

If any employer fails to pay any amount of cess payable under Section 3 within the time specified in the order assessment, such employer shall to pay interest on the amount to be paid at the rate of two per cent every month or part of a month comprised in the period from the date on which such payment is due till such amount is actually paid.

If any amount of cess payable by any employer under Section 3 is not paid within the date specified in the order of assessment made under Section 5, it shall be deemed to be in arrears and the authority prescribed in this behalf may, after making such inquiry as it deems fit, impose on such employer a penalty not exceeding the amount of cess.

 

REGISTRATION OF ESTABLISHMENTS

S.7 of the BOCW Act says that (1) Every employer shall,-

(a) in relation to an establishment to which this Act applies on its commencement, within a period of sixty days from such commencement; and

(b) in relation to any other establishment to which this Act may be applicable at any time after such commencement, within a period of sixty days from the date on which this Act becomes applicable to such establishment, make an application to the registering officer for the registration of such establishment :

and

Section 46 of the BOCW act mandates that employer shall give notice of commencement of construction work to inspector having jurisdiction in the area where site is located.

Effect of non registration or revocation of registration is given in s.10 of BOCW act and would debar the employer from employing building workers.