Chaitanya Patel

Let’s start this week with a topic that has been much discussed recently, and I really liked this contrast of how the discourse of rape is in India versus elsewhere in the world. How the west deals with rape?

The current government seems to be active on many fronts, and taking actions where the previous one was sleeping. An interesting piece on how India targets Maoist Jungle Stronghold to Win Mining Riches

Curiosity is as important as intelligence when it comes to your development as a person.

3-D printing has always been of interest to me so to see this really weird 3-D printed brick that can cool your house really made my day. The article has some information on how a similar device was used to cool houses in the olden days and it was quite a good read.

I was recently checking on air ticket prices, and found out that it is cheaper to fly to Bangkok from Hyderabad than it is to go to Assam. Visa hassles are the one thing that deter me from traveling abroad so it was good to get a list of these countries that have visa on arrival for Indians.

Saudi Arabia has become the world’s biggest arms importer, and guesss who they have edged out?

Great, great article on not only how there could be life but more than that on how they were able to detect such a thing in the first place. Why the warm ocean on the moon of this Saturn could be perfect for life?

Enjoy your weekend!

1. EPS = 10 Rs
2. Return on capital (ROC) = 22%
3. Growth in profits = 15 %
4. Company is able to maintain this return on capital and growth for 10 years. After that the ROC drops to 12% and growth to 8% (leading to a terminal PE of around 12)

I just described the case of several companies such as HDFC bank, Asian paints, Nestle etc. In case of these companies, the markets assumed a certain excess return period, which turned to be too conservative. Anyone who bought the stock at a high looking PE, was actually buying the stock cheap.

Lets look at a few more happy cases. Lets assume that the company actually ends up earning an ROC of 50% with a growth of 20%. If you plug in these numbers, the fair value  turns out to be around 440 (PE=44). I may have just described what has happened to page industries since 2008.

 So what are the key points?

First of all the caveat: What you do with your own budget and life is far, far, far more important in your personal life.

What Jaitely does with the budget is more of academic, economic or political interest. It should not really matter too much.

However, in a country with so much noise about the budget and people wanting big bang reforms, let us see what is really happening.

First take the case of Mr. Mistry of the Tata Group. No comments about the budget, no comments about infra, no complaints, but goes about substantially building the group. I mean consolidating.

He has not announced any big acquisition, de merger, overseas listing, ….etc. etc. However, he has gone about slowly selling a small piece of land here and there, some mining interest in Indonesia, made sure Starbucks role out is happening well – the pricing is just about perfect. He pulled out of a bank license. He is investing in a car factory in China and now in the mecca of the car industry, USA.

Of course our media does not think of this as a big news, but do not be surprised to see Tata Motors double from here. Markets have respect for cash flow. Media has respect for Virat Kohli giving gaalis to a scribe. Choose your poison.

Cut to Narendra Modi’s budget. Just like Mr. Mistry, Na Mo too knew what was important. External Affairs. If he did not do big level marketing your investment bankers could not have gone and attracted money to be invested in India. Then GAAR went out of the window. The IT department was asked to back off its aggression. ‘Establishment of office’ – the stupid clause went. So a Sandip Sabhrawal can manage Mr. Bill Gates’s money sitting in India.

Hey, THESE ARE NOT RADICAL, but these changes will make money available for the Infra spending that we need.

Committing US $ 12 billion for infra (much needed of course) while leaving $ 40 billion for the poor is not easy, it has been done.

Infra spending will increase strength to concentrate on poverty alleviation programs. Setting up toilets for the poor – including schools – will ensure women’s safety and women coming to school. The urban elite does not seem to appreciate this at all.

Good roads are a prerequisite for a bigger manufacturing India. This is not rocket science, is it?

Like any good company the investments have to be made and then you need patience. When Aditya Puri of Hdfc bank raises money in 2015 Jan – you KNOW he is expecting the wholesale banking is going to grow in 2015, and 2016. This confidence comes from seeing the Na Mo government work.

The Railway budget and the Union budget have BOTH brilliantly incorporated Na Mo’s wish list of Investment led growth.

Now go out there and invest YOUR time and effort towards YOUR growth. Do an annually increasing SIP. The market CANNOT GO UP TOO FAST – remember at 30k index you have already seen a 50% growth last year on the indices.

Temper your expectations, but yes fasten your seat belts. We may just take off. 8% growth? 8.3% growth?

who knows?

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When S came to meet me in 2009 she had money in the early 2 digit crores…surely more than enough for a 48 year old retiree. I spoke to her, but the glamour of a suave ‘beta’ kind of a Foreign bank was greater…and there she went.

That guy told her the following things:

– Your son does not have a proper job, so he cannot invest in mutual funds.

– The best investments for you are ULIP and structured deals in RE.

– For liquidity you should leave substantial amounts in the savings bank (about 10 years expenses were lying in the SB account)

-Obviously they were a ‘Premium’ account holder.

– the real estate deals are of course a lemon. A dried one at that, you cannot even make a lemonade.

– the RM left the bank and joined a more shady Indian “Wealth damagement” organisation and did a couple of deals with them.

– he has now joined the bank again (came back to the bank) and has sold them another big ULIP which the client can ill afford.

-Oh far more importantly neither the lady nor the son are employed.

Moral of the story?

– If God gave you money it does not mean he gave you money management skills.

– If you do not understand what your bank RM is telling you, say NO.

– If you do not understand what your bank RM is telling you , at least understand that you do not understand.

– You have no excuse to live in a city like Delhi / any other Metro and pretend that you ‘trusted’ the RM

– trusting the RM in most cases a case of being lazy.

– The first transaction could have been bad, but allowing him to cheat you continually for 3 years is STUPIDITY.

– Why the hell would you buy property in locations that you have no hope of visiting or understanding

– Why would you pay interests to a builder at a dramatically high rate when you had money sitting in your SB account?

– whoever you are dealing with you have to check the documents that are coming to you. Simple.

Solution? Search me!!

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There were three new “social” schemes in the budget. These sounded like big government expenditure and the devil is obviously in the details. We have some details from the FinMin.

Accidental Death Insurance for Everyone at Rs. 12 per year

How does this work?

People between 18 and 70 years old, who have a bank account linked to her Aadhaar, give a form to their bank to auto-debit their accounts each year. The insurance will be offered by public insurers and optionally by private insurers too.

Death or full disability is covered with Rs. 200,000 and partial disability is Rs. 100,000.

Cost: At Rs. 12 a year, a premium is hugely subsidized by the government. But how much? I did a quick calculation for a similar policy with Oriental Insurance (a public sector insurer), and the premium came to Rs. 90 per year. The subsidy then comes to Rs.… (Read On...)

People ask me some very simple questions and expect to get a ‘yes’ or ‘no’ answer. Many a times I give it too. It is just meaningless.

Let me tackle with 2 such questions, and I hope you appreciate that the answers are not so simple after all.

The first question is “Subra I have about Rs. 3 crores…do you think it is enough for me to retire?”. The second question is “In how much time do you think I can finish the half marathon?”.

Simple questions, yes, sure, but very very damn complicated answers.

Easiest answer? No application of the mind, say a yes or a no. The person asking is very happy, and I am amused that they have no clue that I did not say anything. Hey I did not apply my mind to that question!!

If you are 49 years of age and you have Rs. 3 crores, HOW THE HELL will I know whether you can retire NOW?

Seriously, please think before you ask such a question. I need to ask you the following questions:

1. What does this Rs. 3 crore consist of? The Rs. 2 crore house with Rs. 40 lakhs furnishing? The one which you bought last year?

2. How long do you expect to live (no matter that your answer is wrong, but I can plan only with a number).

3. When will you actually retire?

4. What will be corpus when you retire?

5. What are your liabilities?

6. How much are your monthly expenses……………….the list just goes on and on…It would be about 40 questions well asked, and well articulated.

If you do all that I will give you an answer. This answer could be off the correct answer by 90%. Sorry but Retirement calculations need to be done on a monthly basis till about 5 years into retirement.

EVEN after that you need to keep checking whether the assumptions are working.

Nos some homework for you: If a person asks a stupid question :”In how much time will I be able to run a half marathon’ – what questions do you think you can ask?

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(Belated) Happy birthday Yahoo!

You surely have grown (20 years old!) and we hope you continue to grow further.

And like any other kid, you too have your own hits and misses. We at NextBigWhat have compiled some of the big billion dollar products that you had, but you probably lacked the foresight to double down on these.

Yahoo: Flickr
The NextBigWhat Startup: Instagram

Yahoo! Local
The NextBigWhat Startup: Yelp (and Zomato).

Yahoo! Messenger
The NextBigWhat Startup: WhatsApp

Yahoo! Groups
The NextBigWhat Startup: Facebook

Yahoo! Music
The NextBigWhat Startup: Spotify

Yahoo! Live
The NextBigWhat Startup: Twitch

Yahoo! Briefcase
The NextBigWhat Startup: Dropbox

Yahoo! Homes
The NextBigWhat Startup: Zillow

Yahoo! Travel
The NextBigWhat Startup: Trip Advisor

Who in the tech history has missed so many opportunities? Microsoft comes closer, we believe.

The post Yahoo! : A Few Billion Dollar Ideas That The Company Missed Out On appeared first on NextBigWhat.

Photo Credit: Chuck Coker || Another Dynamic Duo and their secret Batcave

This piece has kind of a long personal introduction to illustrate my point.  If you don’t want to be bored with my personal history, just skip down to the next division marker after this one.

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There will always be a soft spot in my heart for people who toil in lower level areas of insurance companies, doing their work faithfully in the unsexy areas of the business.  I’ve been there, and I worked with many competent people who will forever be obscure.

One day at Provident Mutual’s Pension Division [PMPD], my friend Roy came to me and said, “You know what the big secret is of the Pension Division?”  I shook my head to say no.  He said, ” The big secret is — there is no secret,” and then he smiled and nodded his head.  I nodded my head too.

The thing was, we were ultra-profitable, growing fast, and our financials and strategies were simple.  Other areas of the company were less profitable, growing more slowly, and had accrual items that were rather complex and subject to differing interpretations.  But since the 30 of us (out of a company of 800) were located in a corner of the building, away from everyone else, we felt misunderstood.

So one day, I was invited by an industry group of actuaries leading pension lines of business to give a presentation to the group.  I decided to present on the business model of the PMPD, and give away most of our secrets.  After preparing the presentation, I went home and told my wife that I would be away in Portland, Oregon for two days, when she informed me we had an important schedule conflict.

I was stuck.  I tried to cancel, but the leader of the group was so angry at me for trying to cancel late, when I hung up the phone, I just put my head on my desk in sorrow.

Then it hit me.  What if I videotaped my presentation and sent that in my place?  I called the leader of the group back, and he loooved the idea.  I was off and running.

One afternoon of taping and $600 later, I had the taped presentation.  It detailed marketing, sales, product design, risk control, computer systems design, and more.  If you wanted to duplicate what we did, you would have had a road map.

But the presentation ended with a hook of sorts, where I explained why I was so free with what we were doing.  We were the smallest player in the sub-industry, though the fastest growing, and with one of the highest profit margins.  I said, “The reason I can share all of this with you is that if you wanted to copy us, you would have to change an incredible amount of what you do, and kill off areas where you have invested a lot already.  I know you can’t do that.  But maybe you can imitate a few of our ideas and improve your current business model.”

So my colleague took the tape to the meeting, and when he returned, he handed me a baseball cap that had the word “Portland” on it.  He said, “You did it, Dave.  You won the best presentation of the conference award.  Everyone sent their thanks.”

Sadly, that was one of the last things I did in the Pension Division, as corporate management chose me to clean up another division of the company.  That is another story, but one I got few thanks for.

Today I call that hat “the $600 hat,” and I wear it to my kids baseball and softball games as I keep score.

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The secret of Berkshire Hathaway is the same as my story above.  There is no secret. Buffett’s methods have been written about by legions; his methods are well known.  The same applies to Charlie Munger.  That’s why in my opinion, there were no significant surprises in their 50th anniversary annual letter. (There were some small surprises in the annual report, but they’re kinda obscure, and I’ll write about those tomorrow.)  All of the significant building blocks have been written about by too many people to name.

Originally, this evening, I was going to write about the annual report, but then I bumped across this piece of Jim Cramer’s on Buffett.  Let me quote the most significant part:

…Cramer couldn’t help but wonder if things in the business world could be different if we approached other CEOs the way that Buffett is approached.

Perhaps, if the good CEOs were allowed to stay on longer like Buffett has or if people treated them as if they were their companies the way that Buffett is treated in relation to Berkshire, things could be different?

“Clearly something’s gone awry in the business world if we can praise this one man for everything he does, and yet every other chief executive feels shackled into being nothing like him,” Cramer said.

Cramer is very close to the following insight: the reason why more companies don’t imitate Berkshire Hathaway is that they would have to destroy too much of their existing corporations to make it worth their while.  As such, the “secrets” of Berkshire Hathaway can be hidden in plain view of all, because the only way to create something like it would be to start from scratch.  Yes, you can imitate pieces of it, but it’s not the same thing.

Creating a very profitable diversified industrial conglomerate financed by insurance liabilities is a very unique strategy, and one that few would have the capability of replicating.  It required intelligent investing, conservative underwriting, shrewd analysis of management teams so that they would act independently and ethically, and more.

Indeed, an amazing plan in hindsight.  Kudos to Buffett and Munger for their clever business sense.  It will be difficult for anyone to pursue the same strategy as well as they did.

But in my next piece, I will explain why one element of the strategy may be weakening.  Until then.

Full disclosure: long BRK/B for myself and clients

Former Igate CEO Phaneesh Murthy’s new online pharmacy marketplace – PM Health and Life Care, is looking to raise $10 million in funding.

Murthy’s venture capital firm PM Ventures will invest $2 million in the firm, while other investors include Tiger Ramesh and Ramesh Mengawade, who’ve invested $1 milllion.

The online pharmacy marketplace will make its debut in September this year, and will deliver drugs across 10 cities initially within committed delivery timelines.

The Indian pharma retail market is estimated to be worth $56 billion, out of which unorganized players’ account for over 95% of the market.

Given the recent growth of online shopping in India, along with the dearth of large trusted players in the market, PM Health and Life Care is looking to disrupt the Indian pharma market for good.

[Source: Times Of India]

The post Ex-Igate CEO Phaneesh Murthy’s Online Pharmacy Looks To Raise $10mn appeared first on NextBigWhat.

Let us be fair to Arun Jaitely, it was not an easy job. His boss has clearly said ‘no populist measures’, and AJ himself is not very experienced.

On the other hand AJ or Na Mo did not really matter. The people are (were) expecting magic from Na Mo. The people surrounding him would have made him believe that he is God (the Delhi results helped in keeping him on the ground).

The Railway budget and the annual Central Budget have one thing in common – many small changes. Chipping away at the stone so that it looks like an idol is Na Mo’s way of doing things. He does not do big bang. Of course Ganga cleaning, Swachha Bharat, etc. are big bang, but he did not announce any big bang reforms in the financial sector.

His team has correctly identified our biggest problem – lack of investments by the people who have money. Look even at Bombay House – Mr. Mistry is consolidating. He has sold assets, companies, etc. BUT he is not investing big time. He realizes that mistakes like Mundhra can hurt even a big group like the Tatas and hold back their growth. I am sure the group’s biggest investment is in JLR and not in any other business. The reasons are obvious.

The tax change from 30% to 25% is a welcome move – but it will not really make people invest more. Tax is only for people who make profits!!

The infra funds like spending $ 12 billion and the setting up of an Infra fund with Rs 20,000 crore capital allocated is good, but one has to see the implementation.

No major changes in taxation, but I do not like the increase in Service tax. This hurts the small man more than the big man.

Not sure whether he can do a differential service tax. I am not sure whether it is worthwhile.

Why the individual personal taxation also cannot be reduced like the corporate tax rate, beats me. However, I continue to maintain that we are in the MECCA OF TAXATION as far as equities is concerned. It cannot get better.

Like I said elsewhere “The Forbes List does not have any employees” – to get seriously rich you need CAPITAL GAINS.

However, the budget is not bad. Like they say the devil is in the details. Let us see Na Mo’s ability to implement. I wish him all the luck and hope that he is able to do a good job. As a man NARENDRA MODI has shown amazing implementation skills in Gujarat. Let us hope we allow him to do it for India.

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a nice read, just 42 pages…you should start reading from page 24…and read very slowly to see if you have made similar mistakes / correct decisions / what could go wrong.

Remember what you have read elsewhere too….LEARNING is not about reading, it is about applying.

http://www.berkshirehathaway.com/letters/2014ltr.pdf

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New Pension Scheme is a government scheme to provide a pension for you. So why should you not invest in it?

I do not like the terms and conditions…and the fact that it is EET. I would prefer a PPF or ELSS which is EEE.

Forget that…Pattabhiraman Murari has more reasons than what I have about investing in NPS. Stay away, at least for the younger people that is the message.

What I do not like about NPS is something else. Look at the money that it controls. Assume that it is about Rs. 300,000 crores. Now this amount will increase @ 20% every year. About 10% by way of growth and 10% by way of new contribution. This is not small.

Now if this was in your control you will ensure that this is in safe hands…..However in the hands of the government this can be a bomb.

Some politician will look at Rs. 500,000 crore lying there and get nice, crazy, stupid, kameena ideas. Let me enumerate them:

1. The NPS fund has to invest 10% of its equity in Psu bond funds. This could be extended to psu equities…

2. The nps money has to be invested only in India….however we are allowing investment in US indices.

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Inflation targets are now at 4% starting Jan 2016. This is now a stated goal, with the Government and the RBI agreeing on it. Plus, the RBI needs to come back to the government with reasons if it goes beyond these boundaries for three quarters, with remedial steps.

While this initially sounded like the Government was trying to interfere, this is a benign move. Having a strong inflation target is good. (Here’s the full agreement)

Monetary Policy Agreement Between RBI and Government

But this pins the responsibility entirely on the RBI. The RBI cannot affect fiscal policy. If the government has increased excise duty on petrol by 84%, and crude prices go up, the only thing the RBI can do is fret: the government has to cut duties to reduce inflation. (Fuel inflation is a good part of the CPI).

This is the operating zone (shaded) of the CPI.

In recent days, inflation’s been going up.… (Read On...)

After I wrote that post on “People I Admire“, I began thinking that I should start listing my heroes. So let’s make this a series. Here’s part 2 of the series. I will mention two people. One of them used to be my neighbor at the Convent. Did you know that I spent one year at the Convent? Yes I did, although it was naturally not a functioning convent when I lived there. The other person is someone I haven’t met but I would dearly like to meet. He works (and I guess, lives) in the SF Bay area, and therefore I can claim that he’s a distant neighbor. They share one thing in common: they are both black — or to use the more politically correct term, they are African-American.

OK, so let’s start with my year of living in the Convent. As a student at UC Berkeley, I lived in a student housing co-op, the University Students Cooperative Association (USCA.) The first year I lived in a house (the largest in the co-op) called Cloyne Court & Hotel. Why that name? Because it used to be a hotel once upon a time. It’s an ancient structure, with the distinction of being on the National Registry of Historic Buildings.

Cloyne Court was huge and it housed 150 students. It also meant total chaos. So when I got the opportunity, I moved to a smaller house. The Convent (picture left), with only 24 residents, was the smallest house in the co-op. The move from the biggest house to the smallest house was really refreshing although the commute went up a bit. Cloyne Court was at the edge of the campus but the Convent was a mile west. But I am not complaining.

I got a nice corner room at the Convent overlooking the courtyard. Actually, it was more like a 8’x10′ cell but with great big windows. Remember that it used to be an actual convent. It even had a chapel which had been converted into a large game and music room. Anyhow, all the rooms were single-occupancy and small, except for one room downstairs which used to be the Mother Superior’s room and had its own attached bathroom.

Anyway, enough with the description of the general scenery.

I had noticed that the room next to mine at the Convent was always locked and that I had not seen the resident. I asked and got to know that it was a room reserved for one Mr Ward Connerly. Who? I was told that Connerly was a Regent of the University of California and that when he come to Berkeley on Regent related work, instead of staying at an expensive hotel, he sleeps over at the Convent. With time, I got to know that Mr Connerly was someone who had earned the eternal hatred of leftists. That immediately endeared him to me. I leave you to read his biography on the Wiki. Too bad I never got to meet him even though he was in a sense my neighbor.

I admire him for his principled stance on a topic of great interest to me: institutionalized discrimination. I think it is just fine by me if a person discriminates against me for whatever reason. And I too reserve my right as an individual to discriminate for or against a person or a group of my liking or disliking. What I am against is institutionalized discrimination. For instance, I don’t want the government or the legal system to discriminate for or against me based on some attribute of mine that I have no control over. It goes against the generality principle and principle of equality under law.

I will introduce the other person in the next piece in this series. Please feel free to guess who that might be.

A 69-year old agriculturalist from North Karnataka stunned Karnataka Chief Minister Siddaramaiah with his suggestions of using technology to boost transparency in agricultural claims, at a pre-budget meeting with members of the farming community.

B M Hanasi, the owner of a 7-acre plot in Shirol village, questioned the CM as to why the government wasn’t making use of Google Earth (to gather the coordinates) and WhatsApp (for communication) to accurately assessing the extent of crop damage in the state.

While other farmers 100 odd farmers demanded waiver of loans and desilting of tanks, Hanasi emphasised the use of technology to reduce corruption where officials were misleading farmers to smartly ‘pocket’ the crop damage compensation money.

“Sometimes, officials and agents take pictures of four or five farmers in the same crop-damaged field by making them stand in different corners. Even if you have not grown the damaged crop, they will project that you have grown it and lost it due to a calamity. The money pocketed through fraudulent claims is huge,” Hanasi explained.

Further he stressed on the lack of efficiency in farmers receiving compensation, which currently is sent to the insurance company, which in turn sends it to the deputy commissioner, making it a lengthy procedure.

Hanasi said the latitude and longitude coordinates on Google Earth can help the government accurately map the survey number of fields, while officials equipped with data enabled devices can send photos of the crop to their officials via WhatsApp.

When quizzed about how Hanasi had grown so tech savvy, he attributed his learnings to students he met on the bus from his village to Hubli or Dharwad. They’d use their smartphones to explore their current location and route, while also sharing photos with each other on WhatsApp.

Having engaged in conversations with them as to how the technology worked, he’d experiment using his son’s smartphone at home, and eventually learned to locate places based on their latitude and longitude using Google Maps.

[Article/Image source: Bangalore Mirror]

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The buyer of an immovable property, valued at Rs 50 lakh or more, is required to pay TDS to the government. This article explains what is TDS on property, who pays it, how it is paid. Since when was the rule introduced? How to interpret limit of 50 lakh in case of EMI instalments, multiple buyers, multiple sellers. How TDS is reflected in Form 26AS? Downloading Form 16B?

When was the rule introduced and why? 

From 1st June 2013 the rule was introduced for compulsory tax deduction( TDS or withholding tax)  by a buyer of an immovable property (other than agricultural land) valuing Rs. 50 lakh or more. This rule also covers the property purchased through home loan.  It also has to paid when the buyer buys an under construction and part payment is done. TDS is deducted on Fixed Deposits,Salary etc. To know more about TDS or Tax Deducted at Source one can read our article Basics of Tax Deducted at Source or TDS

It comes under the  Sec 194 IA, the Income Tax Act 1961. Section 194-IA is applicable to all including relatives, minor, senior citizens etc. However, if transfer is a gift, then one does not have to pay TDS. The main objective for introducing this rule is to track all the high value real estate transactions which were not being registered. Tax so deducted should be deposited to the Government Account online  through any of the authorized bank branches using the e-Tax payment option available at NSDL.

Note: This deduction has nothing to do with the capital gains for the seller.

Who pays TDS?

Buyer  has to pay the TDS.

What is the Rate of TDS ?

The rate at which the buyer needs to deduct tax is 1% and it may go up to as high as 20% if the seller does not disclose his PAN. If the property  purchased is for Rs. 70 Lakhs then one needs to pay tax on full amount i.e 70 lakh not only on amount more than 50 lakh i.e. Rs. 20 Lakhs. In this example if buyer knows PAN of seller then buyer would need to submit TDS  @1% of 70 lakh i.e 7 lakh. Note unlike the Self assessment Tax ,No surcharge and education cess is applicable while deducting tax on sale of property. 

What if buyer does not pay TDS?

If TDS is not paid then interest and penalty would be imposed on the buyer. Interest will be charged at the rate of 1% per month or part of the month if one does not deduct tax or deducts less tax from the day tax was supposed to be deducted to the day tax was actually paid.  The tax deducted has to  be paid within seven days from the end of the month of deduction. Interest will be charged @ 1.5% p.m or part of the month for tax deducted but not paid to the government from the date of deduction till the date of actual payment.

How does the Buyer deposit the TDS to Government?

 TDS on Property is to be done online . The tax should be deposited through challan-cum-statement using Form No.26QB. Form No 16B (TDS Certificate) will be issued by the buyer/deductor within fifteen days from the due date of depositing tax. Overview of steps are as follows. These are explained below.

• Provide Information regarding the transaction of property online at TIN website at https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp. The online form available on the TIN website for providing information on TDS on property is called Form 26QB
• Pay TDS : After successfully providing details of transaction, nine digit alpha numeric Acknowledgement number would be generated. The  buyer or deductor now can:
  • Either pay TDS online immediately through net banking OR
  • Pay TDS within 10 days through net-banking  or by visiting any of the authorized Bank branches.
• On successful payment a challan counterfoil will be displayed containing Challan Identification Number CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment being made.
• Generate Form 16B. Form 16B is the TDS certificate issued by the Buyer  to the Seller. Buyers are advised to save the Acknowledgement Number for downloading the Form 16B from TRACES website. Usually TDS certificate is available for download from the TRACES website after at least 2 days of deposit of tax amount at the Bank. For buyer TDS paid  gets reflected in Form 26AS,usually after 7 days, Check  in Part F of the Form 26 AS under Details of Tax Deducted at Source on Sale of Immoveable Property u/s 194(IA)

How does limit of 50 lakh work out for property value – If paid through EMI or multiple buyers or sellers?

Value of property should be more than 50 lakhs for TDS deduction. Threshold limit of  Rs 50 lakh (50,00,000)  is value of property, not for the number of instalments, the number of buyers or sellers does not matter at all. The value of property is what is specified  in the transfer documents, and is not on the basis of a notional fair market value, such as a stamp duty valuation, even though such valuation may be higher. The property value will include payments to be made to the seller such as legal fees,payment for parking spaces etc.

If one is paying instalment or EMI of say Rs 50 thousand a month but property value is 90 lakh then as the property value is more than 50 lakh though EMI is less than 50 lakh the TDS would be required to be deducted  for each instalment.

Same is the case for multiple buyers or sellers. If  Ram,Shyam sell the jointly owned  property of Rs 60 lakh, the selling  price for each is 30 lakh. So though individual selling price is less than Rs 50 lakh but the sum  value of the transaction exceeds Rs 50 lakh. Thus section 194-IA is applicable and  buyer would have to deduct TDS.

What if the Seller of property is NRI i.e property is bought from NRI?

If property is bought from Non-Resident Indian (NRI) then section 194-IA will not be applicable but  section 195 will come into action. For NRI the limit of Rs 50 lakh is not applicable. If property is bought from NRI, TDS is required to be deducted at the rate of 20% plus Education Cess on the sale amount. Surcharge at the rate of 10% will be applicable if amount paid exceeds Rs 1 crore.

What is agricultural land?

This law does not apply to agricultural land. Definition of agricultural land is as follows :

• It is situated within jurisdiction of Municipality or Cantonment Board which has a population of not less than 10,000 or
• It is situated in any area within below given distance measured aerially:

How is Form 26QB to be filled for multiple buyers and sellers?

In case of multiple sellers, Form 26QB needs to be filed for each seller separately. Similarly, in case of multiple buyers, each needs to issue Form 26QB separately. Quoting from FAQ on NSDL site

How will transactions of joint parties (more than one buyer/seller) be filed in Form 26QB?

Online statement cum Challan Form/ Form 26QB is to be filled in by each buyer for unique buyer-seller combination for respective share. E.g. in case of one buyer and two sellers, two forms have to be filled in and for two buyers and two seller, four forms have to be filled in for respective property shares.

What information needs to be provided for paying TDS for property in Form 26QB?

Information that needs to be provided for paying TDS for property in Form 26QB is as follows:

• Buyer: Name , PAN number and Complete Address of buyer. Buyer is technically called Transferee.
• Seller : Name , PAN number and Complete Address of seller. Seller is technically called Transferor.
• Property: Address of the property,
• Transaction detail : Date of Agreement, Total Value of Consideration,Payment Type (In Lump Sum or instalment), TDS details.

Can one track the TDS? How does TDS show up in Form 26AS?

As you know Form 26AS tracks the tax paid to government, TDS on salary, advance, self assessment tax. So even TDS on Sale of property shows up in Form 26AS seven days after payment as shown im image below

• For Seller of property TDS is reflect in Part A2 under Details of Tax Deducted at Source on Sale of Immoveable Property u/s 194(IA) [For Seller  of Property] 
• For Buyer TDS is reflected in Part F under Details of Tax Deducted at Source on Sale of Immoveable Property u/s 194(IA) [For Buyer of Property].

TDS details of Buyer and Seller of Property in Form 26AS

Steps to pay TDS on property

Steps to pay TDS on property online with paying tax online are as follows:

1. Go to NSDL-TIN website https://www.tin-nsdl.com
2. Click on the option TDS on Sale of Property. It will open  Form 26QB
3. Fill the details as required in Form 26QB
4. Then click on PROCEED button. PAN Details will be validiated.
5. After validation of PAN, verify the details entered by you and click Confirm.
6. After confirming, select the payment method
   1. If you paying immediate through netbanking, click the option for submitting it to the Bank and then login to the net-banking site with your user ID & password and enter the payment details.
   2. If you cannot pay online, an online receipt for Form 26QB with a unique Acknowledgment Number is generated which is valid for 10 days after generation. You can take this toone of the authorized banks along with your cheque. The bank will proceed with the online payment and generate your challan.
7. On Successful payment, Challan will be generated containing Challan Identification Number (CIN) payment details and bank name through which e-payment has been made. The Challan is like a receipt, a proof of payment made.
8. Buyer should check Form 26AS after 7 days. The TDS paid should be reflected there as discussed above.
9. After few days, Buyer can download Form 16B from TRACES  from the  TRACES the website of Centralized Processing Cell of TDS (CPC-TDS) .Login to the TRACES website, and Click on DOWNLOADS tab. In the dropdown menu click on Requested Downloads. If no application has been made buyer will be asked to make a request for download, here fill in the Acknowledgment Number (Nine Digit Number) which is reflected on Form 26AS in Part F as mentioned above. Once this done, buyer will be able to view the status of his application, which generates an Application Request Number. Our article TDS, Form 26AS and TRACES explains TDS and Form 26AS in detail.
   Within a couple of hours, the application gets processed and buyer will be able to view Form 16B by entering the request number which he has have obtained. He can take a printout of the same for his records as well as for handing over to the seller of the property. Download the .zip file. The password to open the .zip file is Date of Birth of Buyer/ Deductor (the format is DDMMYYYY). The form will be  inside the .zip file as a pdf.
10. Buyer will be responsible to give the certificate of TDS in Form 16B to the seller within 15 days from the due date of submission of the Challan and the seller thus will be able to claim the credit for such TDS against his tax liability.

Related Articles:

• On Selling a  House,
• Capital Loss on Sale of House
• Basics of Tax Deducted at Source or TDS
• Income from House Property and Income Tax Return
• Joint Home Loan and Tax
• How to Calculate Capital gain on Sale of House?