Need adivce/opinion on Sec 194-IA TDS

Lord Nemesis

Lord Nemesis

Overlord
Skilled
Need opinion/advice from CAs/other experts on the forum.

https://www.tin-nsdl.com/TDS/TDS-Introduction.php

As per this newly introduced section, the buyer of a property worth more than 50Lac is supposed to deduct 1% TDS on the sale value or on each installment payment.

Lets say, I am paying an installment of 10Lac. Service tax works out to 30900. Do I need to include the Service tax and make the 1% deduction or is it on the 10 Lac. I mean which these below cases is the correct one?

case 1:
TDS = 1% of (10,00,000 + 30,900) = 10,309
Payment to builder = 10,00,000 + 30,900 - 10,309 = 1020591

case 2:
TDS = 1% of (10,00,000) = 10,000
Builder share = 10,00,000 + 30, 900 - 10,000 = 10,20,900
 
Logically it should be case 2. You should not be paying tax on another tax. i.e. TDS for Service tax.
Even in the second link mentioned by @MAGNeT , the same is mentioned.
"The Buyer of the Property is required to deduct TDS on Property from the Purchase price of the Property......"

Do Update here once you have an official confirmation. This will be helpful for many others.
 
Isn't service tax like 12.5%?
Looks like 3.09% here.
Also I think service tax is added after deduction of TDS. I may be wrong though, but I think case 2 is like this:
1000000 - 10000 + 3.09% = 1020591.
 
From the first link posted by magnet.

Is the tax needed to be deducted on the amount paid towards indirect taxes (such as service tax, VAT, etc)?
Conservatively, tax is required to be deducted on the full sale consideration including the indirect tax component.
Click to expand...

It specifically says that the amount has to be deducted on the total amount including service tax. It seems like a debate is going on regarding this and no one is completely clear. My builder is any way saying that I don't need include the service tax amount. So I am going to go by that.[DOUBLEPOST=1404371532][/DOUBLEPOST]http://reviewofweb.com/how-to/fill-26qb-and-download-16b-form-traces/
  • TDS would be calculated on the total value and not just the BSP i.e. you have to include EDC/IDC, parking, service tax.
Click to expand...
 
Last edited:
6pack said:
Isn't service tax like 12.5%?
Looks like 3.09% here.
Also I think service tax is added after deduction of TDS. I may be wrong though, but I think case 2 is like this:
1000000 - 10000 + 3.09% = 1020591.
Click to expand...

Service Tax is 12.36%. But its applicable on 25% value of the property only. So, for a property worth 40,00,000 service tax is applicable only on 10,00,000 @ 12.36%. Instead of calculating 25% of sale value and then calculating 12.36% of that, its much more simpler to apply the 25% on the tax rate which works out to 3.09% and calculate against the full amount.
 
How did you divide service tax when its applicable on part amount only?
Reading what you wrote, it means you have to calculate full 12.36% s.tax and not 3.09% on the amount you get after deducting TDS. I may be wrong though.
 
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