Section 194IA TDS on transfer of certain immovable properties

Tax Deduction at Source on transfer of certain immovable properties (other than agricultural land) [Section 194-IA]

Analysis of Section 194-IA20

1. Person liable to deduct TDS u/s 194-IA

Any person (transferee), other than the person referred to in section 194LA, responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land) shall be liable to deduct tax.

2. Meaning of Immovable Property

“Immovable property” means any land or any building or part of a building.

3. Meaning of agricultural land

Agricultural land means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of section 2(14)(iii).

Items (a) and (b) of section 2(14)(iii) are as under:

“Agricultural land situate—

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or

(b) in any area within the distance, measured aerially, –

(i) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or

(ii) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakhs; or

(iii) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.

Population means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year.

Crux: Section 194-IA shall not be applicable in case of transfer of rural agricultural land situated in India.

4. Timing of deduction of tax

Tax is to be deducted:

(c) at the time of credit of such sum to the account of the transferor, or

(d) 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.

5. Rate of TDS

The rates of TDS in case of transfer of immovable property shall be 1% of consideration or the Stamp duty value, whichever is higher

6. Whether Surcharge or Health education cess shall be added?

No surcharge or health and education cess shall be added to the above rates.

7. Rate of TDS if Pan no not provided- 20%

8. Tax not to be deducted in case of transfer of certain immovable property

In the following cases tax is not to be deducted at source under section 194-IA:

1. The immovable property transferred is a rural agricultural land.

2. The immovable property has been compulsory acquired under any law.

3. The total amount of consideration for the transfer of immovable property is less than ₹50,00,000.

9. Procedure of deposit of tax deducted at source under section 194-IA

Notification No. 39/2013, dated 31.5.2013 has prescribed the procedure for deposit of tax deducted at source, which is as under:

1. Challan-cum-statement in Form No. 26QB– To be filled within 30 days from the end of the month in which the deduction is made along with the payment of tax.

2. Details Required for filing Form No. 26QB

• • PAN OF Seller & Buyer
  • Agreement to sell or Letter of Intent which specify the date of payments and consideration amount.

3. Whether TAN required for transferee? – No

10. Form, time limit and procedure for issue of TDS certificate of deduction of tax under section 194-IA [Rule 31(3A)]

Form No.16B

The person responsible for deduction of tax under section 194-IA 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.

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Extract of Section 194-IA – Bare Act as amended by Budget 2022

(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 or the stamp duty value of such property (Amended by Budget 2022), whichever is higher, as income-tax thereon.

(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property, are both (Amended by Budget 2022) 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;

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

(c) “stamp duty value” shall have the same meaning as assigned to it in clause (f) of the Explanation to clause (vii) of sub-section (2) of section 56.