Section 194IA: TDS on Immovable Property Transfer (Other than Agricultural Land)

Applicability of TDS Under Section 194IA: This section is applicable if immovable property such as land or any building other than agricultural land is transferred, and the value of consideration is Rs 50 Lakh or more. It includes all types of immovable property such as flats, apartments, houses, land (vacant plots or unconstructed land), and commercial buildings.

Who is Responsible to Deduct TDS: Any person responsible for paying to a Resident transferor any sum by way of consideration for the transfer of any immovable property is liable to deduct tax at source under Section 194IA.

Rate of TDS: TDS is 1% if the recipient furnishes PAN; otherwise, 20% is to be deducted on the total value of the property (i.e., on consideration) or stamp duty value, whichever is higher.

Note: No surcharge or education cess shall be added, and only the basic rate is to be taken, i.e., 1%.

When to Deduct TDS: TDS is to be deducted at the time of payment (in cash, by cheque, by draft, or any other mode) or at the time of giving credit to the transferor, whichever is earlier.

Note: Credit to the transferor means in the books of the transferee.

Whether Provision of TAN is Applicable: No, the provision of section 203A shall not apply to TDS under Section 194IA. So, the deductor need not have TAN for deducting TDS under this section.

Threshold Limit: No TDS is to be deducted where the consideration paid or payable for the transfer of an immovable property is less than Rs 50 Lakh. It means it is applicable once the consideration is equal to or more than Rs 50 Lakh.

Once the value exceeds Rs 50 Lakh, then TDS is to be deducted on the entire value and not on the amount over and above Rs 50 Lakh.

If more than one buyer and seller are involved, then we have to consider the entire value of the property to determine the applicability of the threshold limit of Rs 50 Lakh. For applying this section, the individual share value of the property should not be considered.

When Section 194IA is Not Applicable: If a person acquires rural agricultural land in India as defined in section 2(14)(iii) of the Income Tax Act, 1961.

Sale consideration or the stamp duty value of the property is less than Rs 50 Lakh.

This section is not applicable if the transferor is Non-Resident in India.

If it comes under compulsory acquisition of immovable property.

Meaning of Consideration: Consideration for the transfer of any immovable property shall include all charges of the nature of club membership fees, electricity or water facility fees, maintenance fees, advance fees, or any other charges of a similar nature, which are incidental to the transfer of the immovable property. It implies that such charges attached to the property will also be included in the total taxable value.

Stamp Duty value means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property.

This section is applicable if such property is in India or may be situated outside India, but the transferor must be a resident in India.

Time to Deposit TDS and Issue Forms: Any sum deducted under section 194IA shall be paid to the credit of the 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.

The person responsible for the deduction of tax under section 194IA shall furnish the certificate of deduction of tax at source in Form No. 16B to the payee within 15 days from the due date for furnishing the challan cum statement in form No. 26QB under rule 31A.

More than one buyer or seller: Challan and Form 26QB will be filled in by all the buyers for respective sellers for their respective shares.

When a property is sold, the buyer is required to deduct TDS from the total consideration paid to the seller. In the context of joint owners selling a property, the TDS liability is typically divided among the co-owners in proportion to their ownership share. Each co-owner is responsible for paying taxes on their respective share of the capital gains arising from the sale.

Other Points: If payment is made in installments, TDS will be deducted on each installment.

TDS on immovable property for NRIs is under section 195.

Interest, Late Fee, and Penalty for Non-compliance: In case the TDS has not been deducted, the buyer would be required to pay 1% interest per month or part of the month on the amount not deducted from the date on which tax was deductible to the date of actual deduction under Section 201(1A)(i).

In case the TDS has been deducted but has not been paid, Interest @ 1.5% per month or part of the month would be applicable. It is applicable from the date on which tax was deducted till the date of actual payment under Section 201(1A)(ii).

In case of late filing of TDS Return, a penalty of Rs. 200 per day (under Section 234E) would be levied. However, the Penalty should not exceed the amount of TDS for which this Form has not been filed.

The Income Tax Officer may also levy a penalty, which shall be not less than ten thousand rupees but which may extend up to Rs. 1 Lakh for Late Deposit of TDS on Property under Section 271(H)(2).