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Note on Section 194-IA – TDS on Purchase of Immovable Property

Any person responsible for paying any sum to a resident transferor by way of consideration for transfer of an immovable property (other than agricultural land in rural area) is liable to deduct tax at source u/s 194-IA.

CA Rachana Kanoi

1. Who is responsible for tax deduction under Section 194-IA

Any person responsible for paying any sum to a resident transferor by way of consideration for transfer of an immovable property (i.e. building or part of building or any land other than agricultural land) is liable to deduct tax at source u/s 194-IA. This provision came in June 2013.

In other words, as per this section the buyer has to pay TDS and not the seller.

2. When tax has to be deducted

At the time of payment or credit, whichever is earlier.

3. Rate of TDS

TDS to be deducted @ 1% of the total sale consideration. However, TDS needs to be deducted @ 20%, if the deductee does not furnish PAN.

4. Threshold Limit doe deduction of TDS under Section 194-IA

No tax is deductible where the consideration paid or payable for the transfer of an immovable property is less than Rs. 50,00,000/-.

5. Online Payments- Form 26 QB

Online Payment of TDS through challan cum statement on Form 26QB through NSDL Website:- Tax so deducted should be deposited to the Government Account through any of the authorized bank branches using the e-Tax payment option available at NSDL. TDS so deducted shall be paid within 30 days from the end of the month in which TDS was deducted.

6. Steps to Pay Tax Online

  • Log on to NSDL-TIN website (www.tin-nsdl.com) or Alternatively person seeking payment of TDS on sale of Property can also use the following link –  https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
  • Under TDS on property, click on the option “Form 26 QB

  • and select 0020 if you are corporate payer and 0021 if you are a non corporate payer. Fill the necessary details.

– Select Financial Year from the drop down for which payment is to be done.

– Select Tax applicable for which payment is to be done.

– Mention PAN of Transferee/Buyer

– Mention PAN of Transferor/Seller

– Re-enter PAN of Transferee/Buyer

– Re-enter PAN of Transferor/Seller

– Provide Complete address of Transferee/Buyer

– Provide Complete address of Transferor/Seller

– Provide Complete address of Property transferred

– Mention the date of Agreement/Booking of property

– Mention the Total value of consideration (Property Value)

– Mention if the above payment is done in Lump sum or in Installments

– Please select the amount paid/credited (Enter the amount paid to the Transferor/Seller)

– Please enter the TDS rate (Tax rate at which the TDS was deducted by the purchaser at the time of purchase of the property)

– Please enter the TDS amount to be paid (amount deducted by the purchaser at the time of purchase of the property)

  • On proceed, confirmation page is displayed to verify the details entered
  • If all the above detail including the name displayed (as per ITD) is correct then, click on “SUBMIT” button
  • In case you have made a mistake in data entry, click on “EDIT” to correct the same.
  • There are 2 modes of payment at the bottom of the page  , i.e. e-tax payment immediately (through net banking) or e-tax payment on the subsequent date. Choose the anyone with which you want to proceed.

  • If you choose net banking- login to your bank account and pay online.
  • Deductor will have to login to the net-banking site with the user ID/ password provided by the bank for net-banking purpose.
  • On successful login, enter payment details at the bank site.
  • On successful payment a challan counterfoil will be displayed containing CIN, payment details and bank name through which e-payment has been made. This counterfoil is proof of payment being made.
  • If you choose payment to be made later on- an online receipt with unique acknowledgement number is generated which is valid for 10 days after generation. For payment through bank, this receipt is to be taken along with the cheque to an authorized bank for payment.

7. Important Points to be Noted:-

a) Threshold limit of Rs. 50 Lacs will be applicable to each & every property separately.

b) Property can be either of residential or official purpose.

c) Purchaser can be a dealer, user of the property or a salaried employee.

d) TDS certificate must be issued to the deductee in Form 16B within 15 days from the due date of deposit of TDS.

e) The deductee shall be entitled to avail credit for the entire amount of TDS deducted during the financial year in its Return of Income.

f) TDS u/s 194-IA shall be deducted even if the transaction takes place before 1st June, 2013 and payment is made after 1st June, 2013.

g) However, if credit to the account of the transferor has been given before 1st June, 2013 then provisions of section 194-IA will not apply, even if payment has been made after 1st June, 2013. (Payment or credit whichever is earlier)

h) In case of under construction properties, TDS will be required to be deducted on installments paid on or after 1st June, 2013, if the aggregate purchase consideration is more than Rs. 50 Lacs. Thus, no TDS is required to be deducted in respect of installments paid before 1stJune, 2013.

i) In case any installment becomes due before 1st June, 2013 but paid after 1st June, 2013 and the transferee has not credited the same to the account of the transferor before 1st June, 2013, then provisions of section 194-IA shall apply and TDS will be deducted on the amount paid after 1st June, 2013.

j) In case of installment system of payment, TDS is required to be deducted on all such installments individually which fall due after 1stJune, 2013 but only on principal portion and not on the interest or penalty portion.

k) In case the property is partly financed by bank then TDS will be required to be deducted by the transferee on the entire amount of consideration.

l) The threshold limit of Rs. 50 Lacs is with reference to each property. If a property transaction involves more than one buyer and share of each buyer in the property is less than Rs. 50 Lacs but the value of the property in aggregate is more than Rs. 50 lacs then provisions of section 194-IA will be applicable. In such case, TDS will be deducted and deposited by each buyer in respect of their respective share in the property.

m) Similarly, in case of a property transaction involving more than one seller, TDS will be deducted in respect of amount paid to each seller and their respective PAN will be quoted while making payment through Form 26QB.

n) Provisions of TAN as prescribed u/s 203A shall not apply in respect of tax deducted u/s 194-IA.

o) Immovable property means any land, building or part of building. Such property may be situated in India or outside India.

p) TDS provisions of section 194-IA shall apply only if the transferor is resident in India.

q) TDS provisions of section 194-IA shall not apply if a person acquires rural agricultural land in India.

r) A land is not treated as agricultural land if:

  • 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:
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

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Categories: Income Tax

View Comments (63)

  • Dear Sir,

    We purchase a flat for Rs.55,00,000/- and paid whole amount to the seller without deducting TDS. Now we recd the notice for payment of TDS. We approched to the Seller but he denies to do the same.

    Another angle, seller purchase the property of
    the same amount. Can we get the concession for the payment of TDS on that.

    Please guide.

    Regards,

    Sandesh

    • Dear Sir,

      We purchase a flat for Rs.55,00,000/- and paid whole amount to the seller without deducting TDS. Now we recd the notice for payment of TDS. We approched to the Seller but he denies to do the same.

      Another angle, seller purchase the property of
      the same amount. Can we get the concession for the payment of TDS on that.

      Please guide.

  • If the Bank has given the TDS amount deducted amount to the buyer, then the buyer has to remit the same to the Income Tax department immediately and should not wait till possession as he will be liable to interest and fees to IT depat. P N Rao

  • Hello, I purchased a property in Jan 2011 value 55Lacs. I have paid 35Lacs before 1st June 2013 and the rest 20L thereafter till now. Since the sales agreement was made prior to June 2013, is this 1% TDS rule applicable in my case as the property is still not fully constructed and handed over to me?? If yes, do I have to pay TDS on 25Lacs paid after 1st June 2013 or the entire amount since Jan 2011 i.e. on 55Lacs?? Please explain, I have read many articles here but still confused, some say its applicable and some say not applicable.

    • Dear Mr Uttam, i also have the same query as yours, pls let me know what action was taken by you in the situation. I am not able to find any solution to it as of yet.
      Regards
      ashwani.

      • Yes, finally I ended up paying 1% TDS on the part paid in later half when the rule was applied after june13. Now another issue has cropped up, since i have paid service tax on cost, not High Court has ruled to not pay further and seek refund for what was already paid, too much confusion and this is India so what to say.

  • we are four partners sold a property but the purchaser paid the advance amount more than the sharing ratio now the purchase says that he will deduct the 1% TDS to whom the amount is been paid i want to know whether tds of 1% under section 194IA can be deducted in the capital sharing ration

  • I bought a under construction flat whose value without GST is below Rs 50 Lacs, but it exceeds Rs 50 Lacs with GST. Should I deduct 1% TDS ?

    There is a CBDT circular ​which clarifies that TDS is to be deducted on amount excluding GST, if GST is indicated separately. While this circular clarifies the 'quantum' on which 1% TDS should be applied, but it is not clear whether or not GST should be excluded from consideration value for the purpose of scoping TDS applicability limit of Rs 50 Lacs.

    Please share your valuable opinion with any case law or guidance issued on this matter

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