• TDS on under constructed property

We bought an under constructed property in 2011. The property is still incomplete and the builder has filed for bankruptcy. Thus the landowner has taken it up to complete the construction with the balance payment + additional payment from owners. High Court has directed the apartment owners to register our flats though they are incomplete. However I've not paid the TDS yet. And would like to know the below regarding TDS
1. Is TDS applicable as the builder is bankrupt and construction is incomplete
2. If TDS is applicable , will it be only on the amount paid after June 2013 or will it for past payments as well.
3. If TDS is applicable whose PAN should we use now as seller
4. How to calculate the penalty if TDS is applicable
Asked 2 months ago in Property Law from Bangalore, Karnataka
Religion: Hindu
Effective June 1, 2013, the income tax rules require the purchaser of any immovable property (except of agricultural land) of value exceeding Rs 50 lakh to withhold income tax at the rate of 1 per cent and deposit it with the government at the time of credit or payment of such sum (whichever was earlier) to a seller who was a tax resident of India.

2) The new provision applies to agreements entered prior to June 1, 2013 (where the value of the immovable property is more than Rs 50 lakh) only for payments made on or after June 1, 2013. The provision is applicable even if the payments to be made on or after June 1, 2013 are less than Rs 50 lakh, when the overall consideration is more than Rs 50 lakh.

3)required to fill up the requisite challan in Form 26QB and deposit the appropriate tax within seven days from the end of the month in which the amount was deducted

.4) TDS is applicable 

5) you have to use landowner PAN as seller as he would be collecting additional payment and completing the construction 
Ajay Sethi
Advocate, Mumbai
23264 Answers
1219 Consultations
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Mantri Premero on Sarjapur Road. If this is the same property then you will need to seek permission of the Official Liquidator who will provide PAN details into whose account you will have to deduct the TDS as per law if the value of the property is more than 50 Lakhs. Since you have made payments at various stages of the construction you should have ideally deducted tax at each stage, if you have not then you can deduct at one shot, but you will have to pay penalty which will be calculated by the IT Dept and a separate notice will be sent in this regard.
None the less you will have to deduct TDS into the A/c Number of the Seller (Since Sunil Mantri company is under liquidation) the PAN card details will be provided by the O.L.
Kiran N. Murthy
Advocate, Bangalore
765 Answers
50 Consultations
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Your doubts will be redressed by the Official Liquidator who is appointed by the Hon'ble High Court of Mumbai to over see the registration process, speak with Ramakant Kulkarni, the V.P or Rahul Chaudhuri, the treasurer to get details. In my opinion since the entire process is being under taken under the supervision of the O.L, any doubts or queries will be addressed by his office only. 
Kiran N. Murthy
Advocate, Bangalore
765 Answers
50 Consultations
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Penalty–  Penalty of an amount equal to tax not deducted could be imposed under section 271C. Penalty shall be charged under section 221 if deductor fails to deduct and pay tax to the credit of Central Government. The penalty shall be levied to the extent the Assessing Officer directs, however, the total amount of penalty shall not exceed the amount of tax in arrears 


2) Prosecution: Further, section  276B  lays  down that  if  a person fails to pay to the credit  of  the Central  Government  within  the prescribed  time, as above, the  tax  deducted at  source  by him, he shall be punishable with rigorous imprisonment  for a term which shall be between 3 months and 7 years, along with fine.

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Ajay Sethi
Advocate, Mumbai
23264 Answers
1219 Consultations
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1.  The TDS is on the payment made to the owner/builder, since you have already deducted, it becomes your duty to pay it to the government immediately.

2.  TDS is deduction you made while paying the consideration amount towards the purchase of property.


3.  The seller's PAN



4.  The rates of penalty can be had it from income tax website. 
T Kalaiselvan
Advocate, Vellore
14046 Answers
127 Consultations
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1. Whether there is any way to know the total penalty payable. 

You can calculate or enquire from the IT department dirctly giving the dtails in writing an sent by registered post.



2. Will the penalty be payable after the TDS or together with the TDS. 

you can enquire the details from the income tax department.





3. Will the TDS certificate be available only after all penalty paid or once the TDS is paid as it will be needed for registration. I'm trying to find how many days it will be needed for the entire payment process with penalty to be completed

It may take minimum two weeks. 
T Kalaiselvan
Advocate, Vellore
14046 Answers
127 Consultations
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1. By the Finance Act, 2010 the Government has amended the definition of Commercial or Industrial Construction Service [Section 65 (25b) read with Section 65 (105) (zzq)] and construction of Residential Complex [Section 65 (30a) read with Section 65 (zzzh)]. The scope of these categories is expanded to cover sale of flats/units under construction. Builders/developers are now liable to service tax if any payment towards sale consideration is received before the grant of completion certificate by the competent authorities for such flats/units. In case of under construction properties, TDS will be required to be deducted on installments paid on or after 1st June, 2013, if the aggregate purchase consideration is more than Rs. 50 Lacs. Thus, no TDS is required to be deducted in respect of installments paid before 1st June, 2013. In case any installment becomes due before 1st June, 2013 but paid after 1st June, 2013 and the transferee has not credited the same to the account of the transferor before 1st June, 2013, then provisions of section 194-IA shall apply and TDS will be deducted on the amount paid after 1st June, 2013.

2. If the property is partly financed by bank the TDS is required to be deducted by the transferee on the entire amount of consideration.

3. PAN of the owner has to be used as he will be collecting further payments to complete the project.
Ashish Davessar
Advocate, Jaipur
18151 Answers
448 Consultations
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