prpri Practical difficulties in payment of TDS U/s. 194IA Practical difficulties in payment of TDS U/s. 194IA

We have received an email from our Website Reader Mr. Ajay Bhagwani in which he highlighted the difficultly faced by him in depositing TDS deducted by him U/s. 194IA, which is as follows :-

Recently in the finance Act 2013, TDS @ 1% was introduced u/s 194-IA which got effective from 1.6.2013. It is not clear from the said provision whether this provision is applicable to the property under development / construction or not as till the date construction is complete, even the respective unit/flat is not identifiable unit and till some point of time even it is not in existence. There is no clarity from CBDT side also on this aspect/issue whether in such a situation the provisions of section 194-IA are even applicable or not. It is decided in various decisions as well as, as per provisions of section 53-A of Transfer of Property Act, unless and until complete payment is made and possession is allowed, it is not a purchase and it is only a right to acquire property. Accordingly, strictly in such situation whether provisions of section 194-IA are applicable or not?

Further, off late we have faced another problem in implementation of provisions of section 194-IA. Form no. 26-QB was recently notified as form for depositing TDS on property transaction. In the form no.26-QB, the field on PAN is made mandatory field. We have deducted TDS out of consideration payable to seller pursuant to court order. While making payment to court, we deducted TDS @ 20% of consideration as per provisions of Section 206AA of Income Tax Act, 1961 as we were not having the PAN of seller and seller is not providing the PAN as the seller is not accepting the verdict of court.. While depositing TDS on property online (as it is to be deposited online only and form no.26-QB is to be filled online only), in the absence of PAN as it is made a mandatory field in said form, we are unable to pay the TDS and upload the form.

As in India lot of property transactions are taking place with villagers who do not have PAN and in case transaction value exceeds Rs.50 lacs, TDS is to be deducted @ 1% of transaction value. However, section 206AA provides that in absence of PAN, TDS needs to be deducted @ 20% and section 194-IA is also covered under the provision of section 206AA as it is not made as exception to this provision.

Now, in these circumstances, in the absence of PAN, public at large will find it difficult to comply with said provision of law.

Accordingly, we must present to regulatory authority that form no. 26-QB should be modified to make PAN as non-mandatory field to make enable the public at large to comply with provisions of law.

TDS on Payment to Bank and Financial institutions

There is another problem faced by the customer in complying the provisions of section 194-IA of Income Tax Act, 1961. In case customer takes loan from any bank and financial institutions and the repayment of the loan is through EMI. The payment by customer in the form of EMI to bank/financial institution is towards the consideration for purchase of property and interest thereon.

In such a circumstance, whether the customer is supposed to deduct and pay TDS u/s 194-IA out of each and every installment paid to bank/financial institutions ? Normally banks and financial institutions are exempt from the purview of tax deduction u/s 194-A of Income Tax Act, 1961. However in the section u/s 194-IA there is no such provision.

None of the bank and financial institution or Real estate developer / builders is advising their customer as to how to comply with the provision of law. They are accepting the full payment from the customers who are ignorant of applicability of provisions of Section 194-IA of Income Tax Act, 1961.

It is requested to take this matter with regulatory authority and till that date, CBDT should come out with circular clarifying that the assessee who have deducted TDS @ 20% and are unable to deposit TDS should not be treated as assessee in default as there is no default on the part of assessee to make payment of TDS in time.


1. CPC(TDS) releases Online Correction Facility for 26QB Statements

Mandatory Filing of Form 26QB by Buyer of Immovable Property


CPC-TDS enables online correction in form 26QB


Withholding tax Impact on Property transaction by Non-Residents Indian/Foreign Nationals


TDS on sale of Immovable Property- Beware CPC TDS issuing intimation for late deposit of TDS


TDS on sale of Immovable Property by Non-resident


TDS- Sec.194IA – Payment on transfer of certain immovable property


Transfer of Immovable Property & Income Tax – A Critical Analysis


Procedure for TDS Payment (FORM 26QB) and Generation of Form 16B


Tds On Purchase Of Immovable Property Effective 1st June,2013

More Under Income Tax


  1. CA Lalit Inani says:

    I am also facing a problem for this section. Our Trust has purchased a land from Govt. authority. shall we make TDS u/s.194IA?

  2. K K SARAWAGI says:

    Yes, this is a serious problem and should be sorted out by the CBDT at the earliest. Till the time, the CBDT does not resolve this problem, it is advised that the assessee should inform his/her jurisdictional assessing officer in writing highlighting the above problems and request him not to treat the assessee in default in such case and an opportunity in writing should be given to submit the requisite form physically.

    As regards applicability of Sec.194-IA, it is very clear that tax is required to be deducted at the time of credit of the sum to the account of the transferor or at the time of payment whichever is earlier. When buyer is not maintaining books of accounts, tax is to be deducted at the time of payment.

    Hence, the provision gets attracted at the time the agreement for transfer is entered into by the seller and the buyer. Such agreement can only be entered when there is specific description of the immovable property.

    K K Sarawagi
    Hyderabad / Kolkata

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August 2021