Section 194-IA deals with the deduction of TDS on sale of property. Here, the property means immovable property which includes:
- House property
- Commercial property
- Plot or land other than agricultural land
Buyer is required to deduct TDS @1% on total amount of sales consideration if the sales consideration is Rs. 50 lakhs or more. Here the sales consideration means the amount paid/credited or stamp duty value of such property, whichever is higher.
To check the applicability of Section 194-IA, total value of purchase needs to be checked, not the respective share of the seller. Suppose the property is purchased by two buyers/sellers, and the property value is Rs. 60 Lakhs, So, the sale consideration for respective share of buyer/seller is Rs. 30 Lakhs each which is below the limit of Rs. 50 lakhs, but as per rule, total value of the property will be considered which is 60 lakhs, and hence 194-IA is applicable in this case.
Consideration shall include all charges like 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 the transfer of the immovable property.
TDS deducted must be deposited to the government by the buyer within 30 days from the end of the month I which TDS is deducted. The TDS must be deposited through Challan and Form 26QB available on income tax portal. In case of instalment, TDS has to be deducted for each such instalment provided the total purchase value is Rs. 50 lakhs or more.
The buyer is not required to obtain TAN for making TDS deduction on immovable property.
Points to be considered by Buyer:
- The buyer is required to obtain PAN and aadhar of the seller to deposit the TDS. If the seller does not have PAN, TDS@20% shall be deducted.
- Buyer must make sure that PAN of the seller is operative. If it is not operative, buyer must ask the seller to make his PAN operative first, otherwise 20% TDS rate will be applicable.
- Buyer is required to keep handy all the details like PAN and aadhar of him and seller, contact details and property details while depositing TDS
- After deposit of TDS, the buyer is required to send TDS certification in Form 16B which can be downloaded from Traces.
- In case of default in filing 26QB, the buyer will be liable to pay Rs. 200 per day during which the default continues.
Points to considered by Seller:
- Seller must furnish his PAN and aadhar to the buyer and make sure his PAN is active
- Seller must ensure that buyer has deposited and filed 26QB, else he will not be able to claim the TDS
In case the transaction involves more than one buyer or seller:
If the transaction involves more than one buyer or seller, Challan and form 26QB must be filled in by all the buyers for respective sellers for their respective shares.
The income tax department receives an Annual Information Return (AIR) from the registrar office on regular basis regarding all purchases and sales of properties. So the buyers and sellers must check the applicability of TDS deduction u/s 194-IA. If they do not comply, the department will come to know these details from Registrar office.
Conclusion: TDS on the purchase and sale of immovable property is a crucial aspect of taxation in real estate transactions. Both buyers and sellers must adhere to the provisions outlined in Section 194-IA to avoid penalties and ensure smooth transactions. By understanding their respective obligations and fulfilling them in a timely manner, stakeholders can contribute to a transparent and compliant real estate ecosystem.
Author Bio
