Your Taxes

My wife and I are joint owners of a flat with 25:75 contribution on purchase, respectively. In the tax returns, we have been apportioning the rent received in the same ratio. We are selling the flat now after owning it for six years. We have the following queries:

a) whether the sale consideration is required to be received by way of two cheques/drafts in the same ratio as investment made in individual names; what happens if the entire payment is received in one individual’s name?

b) whether the TDS at 1 per cent of sale consideration is to be effected under two PAN numbers for each individual separately in the ratio of sale consideration for each individual

c) how is the IT return to be filed by the individual if TDS is effected only in one name (and hence covering only one PAN number)

d) whether the 1 per cent deduction is to be done on total sale consideration or the net sale consideration after deduction of brokerage?

Venu Nallur

The payment need not be received under two separate cheques/drafts. It can be received under a single cheque and the person receiving the full amount can transfer the respective share of the other to recognise the income in the bank accounts of both parties. However, receiving the consideration through two cheques/drafts can minimise questions from tax authorities as also the need to explain the inter account transfers.

Regarding TDS, it has to be remitted in the ratio of 25:75 by quoting both the PANs. The credit can be taken by each individual only to the extent of the tax deduction amount appearing in the Form 26AS (tax deduction summary statement) at the year end. If the TDS is remitted by quoting only one person’s PAN, only that person can take credit for the entire amount of deduction made in their income tax return, irrespective of their share in the income/gain. Excess tax withheld can only be claimed as a refund in the tax return. The other person may have to remit the consequential tax liability arising on the long-term capital gains on sale of immovable property. Finally, according to Section 194IA of the Income Tax Act, 1961, tax at the rate of 1 per cent has to be deducted on the consideration for transfer of the immovable property.

Hence, it may have to be deducted on the gross amount before deduction of brokerage. Please note that the tax deduction would be applicable only if the sale consideration of the immovable property on the whole (irrespective of the share ratio) is ₹50 lakh or more.

The writer is Partner, Deloitte, Haskins and Sells LLP. Send your queries to taxtalk@thehindu.co.in