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This article discuss Provisions and Scope of Section 194-IA, Payments covered, Who is Payer/Payee, Conditions to be satisfied for applicability of section 194-IA, Time of deduction of tax, Rates of TDS, Effect of non-furnishing of PAN on rate of tax, Certificate/statement for tax deducted at source, Furnishing of statements by tax deductor to department, Some practical issues and their solutions and Penalty under section 201 in case of non-deduction or non-payment of TDS u/s 194IA.

1. Provision of Section 194IA:

(1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.

(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

Explanation — For the purposes of this section,—

Agricultural Land: Agricultural land means agricultural lands in India, not being a land situated in any area referred to in section 2(14)(iii)(a)/(b).

A land shall not be treated as Agriculture Land, if:

a)  It is situated within jurisdiction of Municipality or Cantonment Board which has a population of not less than 10,000; or

b)  It is situated in any area within below given distance measured aerially:

Population of the Municipality Distance from Municipal limit or Cantonment Board
More than 10,000 but does not exceed 1,00,000 Within 2 kms.
More than 1,00,000 but does not exceed 10,00,000 Within 6 kms.
Exceeding 10,00,000 Within 8 kms.

Immovable Property: Immovable property means any land (other than agricultural land) or any building or part of building.

2. Conditions:

  • The payer must be any person
  • The payee must be a resident transferor.
  • Transfer of any immovable property (other than agricultural land).
  • Consideration for transfer of Immovable property must be Rs. 50 lakhs or more.
  • Consideration for transfer of any immovable property shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property [With Effect From 01st September, 2019]

3. Rate of TDS @ 1%

  • No surcharge or Health and education cess shall be added to the above rate.

4. Effect of non-furnishing of PAN on rate of tax:

Section 206AA, provides as under:

  • Every person whose receipts are subject to deduction of tax at source (i.e., the deductee) shall furnish his PAN to the deductor.
  • If such person does not furnish PAN to the deductor, the deductor will deduct tax at source at higher of the following rates:

(a) the rate prescribed in the Act;

(b) at the rate in force, i.e., the rate mentioned in the Finance Act; or

(c) at the rate of 20 per cent.

  • Where the PAN provided to the deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his PAN to the deductor and above provisions shall apply accordingly.

5. Section 203A: Tax Deduction and Collection Account Number

This provision shall not apply to a person deducting tax at source under Section 194-IA.

6. Time limit for deposit of tax to the credit of the Central Government:

Within a period of 30 days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QB.

7. Certificate/statement:

Every person responsible for deduction of tax under section 194-IA shall furnish the certificate of deduction of tax at source in Form No. 16B to the payee within fifteen days from the due date for furnishing the Challan-cum-statement in Form No. 26QB under Rule 31A after generating and downloading the same from the web portal specified by the Director General of Income-tax (System) or the person authorised by him.

8. Tax not to be deducted in case of transfer of certain immovable property:

  • Rural agricultural land
  • Compulsory acquisition under any law
  • Total consideration is less than Rs.50 lakhs.

9. Some Practical Issues and Its Solutions:

  • TDS on value above Rs.50 lakhs or entire value? – Entire Value
  • Advance payment or installments – TDS at the time of each payment.
  • Transferor non resident – Section 195 is applicable
  • TDS on total sale consideration is required to be deducted – stamp duty value or 50C values are irrelevant.

10. Penalty u/s 201

(a) 1% interest for the delay of every month i.e. Late deduction of tax from the date the tax was deductible to the date the TDS is deducted.

(b) 1.5% penalty for every month on account of late payment of TDS deducted to Govt. from the date TDS was deducted till the actual date of payment.

Late Payment example 1: If Rs. 10,000 tax was deducted on 20th January, 2018, same shall be deposited with the government account till 19th Feb 2018. But if the same is paid say by 7th March then,

Interest will be calculated as follows:

Months of default: 3 (Jan to March)

Amount of Interest: Rs. 10,000*3*1.5%= Rs.450/-

11. Section 234E: Fee for delay in furnishing TDS/TCS statement

Late fee penalty of Rs 200 per day for late filing of the statement of Tax Deducted at Source.

Period:  Due date of furnishing TDS/TCS statement to the date of furnishing TDS/TCS statement.Late fee penalty will be lower of TDS Amount or Delay in No of Days X Rs 200.

Example 2: if TDS Amount is Rs 20,000 and delay are of 150 Days then the late fee is 150 X Rs 200 i.e. Rs 30,000. Lower of Rs 20,000 and Rs 30,000 is Rs 20,000 therefore max late fee penalty is Rs 20,000. Thus, max late fee penalty cannot exceed TDS Amount.

Continuing example 1: If Rs. 10,000 tax was deducted on 20th January 2018, same shall be deposited with the government account till 19th Feb 2018. But if the same is paid say by 7th March then, late fee will be calculated as follows:

No. of days from 20th Feb to 7th March = 16 days

Late fee= 16*200= 3200/- or Rs.10,000 (amount of tax) whichever is lower = Rs. 3200/-

(Republished with Amendment)

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  1. Ankosh says:

    Should GST be excluded while determining the threshold of Rs 50 Lacs.
    Eg: If consideration value without GST is below 50 Lacs, but consideration with GST exceeds 50 Lacs, should 194IA be triggered ?

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May 2024