As we all aware that Finance Act, 2013 has introduced Section 194IA. The main reason behind it is to curb black money which is routed through real estate sector. Today I am discussing this section in detail.

Extract of Section 194IA:

Payment on transfer of certain immovable property other than agricultural land.

194-IA. (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,—

(a)  “agricultural land” means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;

 [(aa) “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;]

(b)  “immovable property” means any land (other than agricultural land) or any building or part of a building.”

Some important provisions or points related to section 194 IA is as under:

  • TDS to be deducted @ 1% of the total sale consideration. However, TDS needs to be deducted @ 20%, if the deductee does not furnish PAN.
  • No tax is deductible where the consideration paid or payable for the transfer of an immovable property is less than Rs. 50,00,000/-.
  • 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.
  • TDS certificate must be issued to the deductee in Form 16B within 15 days from the due date of deposit of TDS.
  • The deductee shall be entitled to avail credit for the entire amount of TDS deducted during the financial year in its Return of Income.
  • 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.
  • 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)
  • Threshold limit of Rs. 50 Lacs will be applicable to each & every property separately. Property can be either of residential or official purpose.
  • 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 1stJune, 2013.
  • 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.
  • 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.
  • 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.
  • TDS provisions of section 194-IA shall apply only if the transferor is resident in India.

Procedure of filing Form 26QB:

  • Firstly one has to go to the site of Tin.nsdl in following link: https://onlineservices.tin.egov-sdl.com/etaxnew/tdsnontds.jsp
  • Once this link is opened click on Form 26QB (Payment of TDS on sale of property).
  • Select (0021) in case of non corporate payer and 0020 in case of corporate payer.
  • On filling in the various details called for in that form, click on ‘Proceed’ at the bottom of the page, this will then take you to the next page, which will give you the option to select your bank.
  • Once you select the bank, then login using the normal online process for your bank. Once the payment is made the bank will let you print challan 280 with a tick on (800), which is payment of TDS on sale of property.
  • Take a printout of the challan and keep the same for your records and for the builder/seller if required. This is the first phase of the process.
  • There is also alternative mode payment if one does not have online banking registration.
  • One can fill in the form as above & while proceed there is option of “Subsequent payment through bank”
  • Choose that & it allows you to generate online receipt for Form 26QB with Ack no.
  • The same can be valid for 10 days from the date of generation online.
  • The same is to be carried at the authorized bank (list is given on the TIN.nsdl site) with cheque.
  • Bank will do online payment for you & generate Challan.

Process to generate Form 16B:

  • Once this is completed one has to wait for seven days for the details to be reflected on TRACES web site – https://www.tdscpc.gov.in/.
  • As a first time user, you will have to register on this website as Tax Payer with your PAN card no. & Challan no as generated while payment (no need to have TAN)
  • Once you register whether as seller or buyer, you will be able to obtain the Form 16B or 26QB which has been approved and is reflected against your PAN in your Form 26AS.
  • Check Form 26 AS after seven days and you will notice that the payment you had effected against TDS on sale of property is reflected in Part F of the Form 26 AS under ‘Details of Tax Deducted at Source on Sale of Immoveable Property u/s 194(IA) [For Buyer of Property].
  • This will give you details such as the TDS certificate number (generated by TRACES), name of deductee, PAN of deductee, acknowledgement number (same as above on Form 26QB), total transaction amount, transaction date, TDS deposited, date of deposit, status of booking and date of booking.
  • Once the payment is reflected in 26AS as above, you will have to go to the TRACES Login to the website & Go to ‘Download’ Tab & make application for request of Form 16B
  • To make a request for download, here fill in the acknowledgment number (nine digit number) & required details as asked which is reflected on Form 26AS Part F as mentioned above.
  • It will give application & generates an application request number.
  • Now, click on ‘Downloads’ In the drop down menu click on ‘requested downloads’. You can filter by way of Request no or by Date filter.
  • You can see you request for Form 16B as
  • Within a couple of hours, the application gets processed and you will be able to view your Form 16B as
  • Download it & it will give Zip file, save at your destination & to open it, use the password of Date of birth of Deductor. (DDMMYYYY). Form 16B will be available in PDF format.

Authors:-

Nilesh BhagatNilesh Bhagat is Senior Manager at Deloitte Haskins & Sells.

Kalpesh KatiraKalpesh Katira is Deputy Manager at Deloitte Haskins & Sells.

All About TDS On Immovable Property Purchase (194IA)

Republished with Amendments

More Under Income Tax

13 Comments

  1. Dipak Vyas says:

    Hi
    Can some expert help me to know : Do Buyer need to pay Stamp Duty on 1% TDS Deducted Amount???
    e.g. If I purchase property worth Rs. 60 Lakh – as per IT Rules I will deduct 1% TDS from Seller Payment and deposit it, Now for Stamp Duty Payment Which Amount will consider i.e. 60 Lacs OR 59.40 Lacs

  2. BHAWANI SINGH RATHORE says:

    Thank you sir for providing a full information in small package.

    but i want to know something more …..
    whether a government authority is liable to deduct their tds  or vice versa on purchase and sale of land or any other immovable property 

  3. D. Rahul says:

    I have a small doubt, whether this Tds on Property will be applicable for individuals irrespective of the conditions laid down for applicability of TDS i.e., he should be liable to Tax audit ???

  4. Gopalakrishna Gupta ES says:

    It is really fine, giving hardships to be faced by the buyer of the property.
    As we are all well aware of the fact that, TDS provisions are always tedious.
    And as you rightly mentioned in your write up, these should be addressed properly or a simple mechanism to provided in the rules.
    Thanks for your immediate efforts and through some light on the implication of the proposed provision in ITA

  5. ANTHONY says:

    Good. It is said that this shall be effective from ist June 2013. Does this mean that property sales beween Ist april 2013 to 31st May 2013 wherein consideration amount is more than 50 lac, the seller shall not be required to pay TDS @1%. Please clarify.

  6. Shahid Khan says:

    A better option would have been to require the registrar of immovable properties to collect the TDS amount from the purchaser at the time of registration, deposit it with the Government, issue TDS certificate in the name of the seller, and file the TDS return. Since the Registrars already have the TAN for filing AIR they do not need to obtain fresh TAN also.

  7. sukumar Mondal says:

    New provision of TDS on sale/purchase of immovable property

    Finance Bill 2013 has proposed to cast an obligation on the buyer of a property to withhold taxes on payments to the resident seller.
    If section 194IA is introduced in its present form then it would cause genuine hardship for individual buyer, since he would have to apply for TAN, file TDS return and issue form 16A to seller.
    All this would increase accounting issues for him and the scope for accounts professional would increase.
    And sellers will face difficulty to get credit of the same TDS as we expect most of the buyers shall not file TDS return ,issue TDS certificate
    In case of exemption claimed by the sellers u/s 54F etc. refund claim will be next to impossibility

    Rather Registrar, Govt Authority, already having TAN, and used to make TDS, and filed TDS Returns, should be empowered to collect the TDS amount by a separate Draft/ or cash deposited in Treasury and isuue a TDS Certificate either in Form No.16A, suitably revised with such provision or a new Form devised , giving details of Sellers/ Buyers , detail address , PAN , details of the property, Value as per deed , Value as determined by Registrar etc. to the seller and file the TDS return accordingly which will make the Refund easier

  8. Mukesh says:

    its really a very good analysis, giving quick overview of the subject and challanges to be faced.
    Very good efforts to share this kind of information.
    Regards,
    Mukesh

  9. SRIKANT AGARWAL says:

    Very good article. The hardship being faced by a prospective buyer (with value >50 Lacs) would be huge in terms of compliance with the provisons of TDS.
    Again the buyer would have to surrender the TAN after the completion of transaction, else he may be penalised for non-filing of Nil TDS return and all.
    Beside it, there would be a great scope for Accounts professional in terms of compliance with TDS provisons.

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