Your taxes

I have booked a flat for purchase from a reputed developer at approximately ₹1 crore. The flat is expected to be delivered three years from now. The developer took post-dated cheques at the time of accepting the booking. The total amount of cheques given was the total consideration for the flat.

While issuing receipt on realisation of each cheque given as instalment, the developer is asking for deduction of TDS as per Section 194IA. I am not clear whether TDS is to be deducted on realisation of each cheque or at the time of taking possession/registration. When the entire consideration amount by way of post-dated cheques is taken by the developer, does not the responsibility lie with the developer to account for the TDS by passing on 1 per cent of each cheque given as instalment?

KR Nataraj

As per Section 194IA, any person responsible for paying a sum of ₹50 lakh or more towards consideration for transfer of an immovable property is liable to deduct tax at the rate of 1 per cent on the total transaction value. The responsibility for TDS deduction rests solely on the purchaser of the property. This condition would hold good even if it is financed by banks or any other home loan company. The amount should be deducted during the time of actual payment of every single instalment, that is, on realisation of each cheque irrespective of the time of registration of the property in the buyer’s name.

The amount so deducted should be deposited with the authorities within seven days from the end of the month in which the TDS is deducted. Further, please note that according to Section 194IA(3), the government has dispensed with the requirement of obtaining and quoting Tax Identification Number for TDS deduction on transfer of immovable property.

Any deferral in deduction of taxes would attract a simple interest of 1 per cent per month while delay in depositing the taxes deducted would result in an interest levy of 1.5 per cent per month from the date of actual TDS deduction to the date of remittance. Additionally, since the tax remittance challan would also serve as the statement of tax deduction to the tax office; any delay in this process would attract a penal charge to the extent of ₹200 per day or the TDS amount whichever is lower.

Since you have already issued post-dated cheques to the developer for the entire value of ₹1 crore, you could request them to repay the TDS amount along with the receipt for each instalment and have this remitted to the government within the stipulated period.

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