Prior to the introduction of section 194-IA, the transaction of immovable property was usually undervalued and under-reported. With a view to improve reporting of such transaction and to curb the black money transactions to some extent, section 194-IA of the Income Tax Act was inserted. Provisions of section 194-IA of the Income Tax Act, 1961 were made effective from 1st June 2013.

Section 194-I prescribes the provisions for tax deduction at source i.e., TDS on the transfer of immovable property and the same has been explained in the present article.

Applicability of section 194-IA of the Income Tax Act

Provisions of section 194-IA of the Income Tax Act, 1961 applies only if the following conditions are satisfied –

  • The transferee is making payment to a resident transfer or;
  • The payment is made on account of transfer of immovable property (other than agricultural land); and
  • Consideration for the transfer of immovable property is more than INR 50 Lakhs.

If all the above conditions are satisfied the transferee (purchaser) is liable to deduct TDS at the prescribed rates within earlier of the following dates –

  • At the time of credit of the amount to the account of the transferor; or
  • At the time of payment of the amount in cash or cheque or draft or any other mode.

The rate at which TDS is to be deducted under section 194-IA

If the provisions of section 194-IA of the Income Tax Act, 1961 gets applicable, the transferee is liable to deduct TDS @ 1%. However, if the transferor (seller) fails to furnish the PAN, then, the transferee is required to deduct TDS at maximum marginal rate of 20%.

Exemption list –

  • TDS under section 194-IA not deductible if the transferor is a non-resident person.
  • TDS is not deductible under section 194-IA for cases of transfer covered under section 194LA i.e., TDS on payment of compensation on compulsory acquisition of certain immovable property.

Deposit of TDS with the Government

When we talk about TDS, it is a general presumption that the Deductor of tax is liable to obtain TAN (Tax Deduction and Collection Account Number), but section 194-IA is an exception to the same. In other words, under section 194-IA the Deductor (transferee) doesn’t need to obtain TAN.

The Deductor is required to deposit TDS by filing Challan-cum-Statement in Form 26QB. The Deductor is liable to make payment of TDS within a period of 30 days from the end of the month in which TDS is deducted.

Filling of Form 26QB –

Following steps should be followed by the Deductor in order to file Form 26QB –

1. Visit site https://www.tin-nsdl.com

2. Navigate the path Services > TDS on Sale of Property.

3. Click on ‘Online form for furnishing TDS on property (Form 26QB)’.

4. Under e-payment of Taxes, go to ‘TDS on Property (Form 26QB)’ and click on ‘Proceed’.

5. Step by step, fill up the Form 26QB and submit.

List of Information needed for filing Form 26QB –

  • PAN of seller.
  • PAN of the buyer.
  • Communication details of both seller and buyer.
  • Details of property.
  • Amount paid / credited and details of tax deposited.

Issuance of TDS certificate –

The Deductor (purchaser) shall furnish the TDS Certificate in Form 16B to the Deductee (seller) within 15 days from the due date of furnishing of the Challan-cum-statement in Form 26QB.

Steps to be followed by the Deductor for downloading Form 16B –

1. Visit site https://contents.tdscpc.gov.in/.

2. Click on ‘Login’ and select ‘Taxpayer/PAO’.

3. Provide UserId and Password and PAN of the Tax Payer.

4. Navigate the following path –

Downloads > Form 16B (For Buyer).

5. Provide following details –

  • Assessment Year.
  • Acknowledgment No. of the Form 26QB.
  • PAN of the seller.

Changes anticipated through Budget, 2019 –

At present, the section doesn’t provide the definition of the term ‘Consideration of Immovable Property’. However, through Budget, 2019, the same has been provided, and it is made effective from 1st September 2019.

As per the said definition ‘Consideration of immovable property would include the following charges –

  • Club membership fee;
  • Electricity and water facility fee;
  • Maintenance fee;
  • Car parking fee;
  • Advance fee; or
  • Any other charges of similar nature which are incidental to the transfer of the immovable property.

Frequently Asked Questions (FAQ) –

1. What is section 194IA?

As per section 194-IA, the purchaser of the immovable property (other than agricultural land) is liable to deduct TDS @ 1% only if a transferor is a resident person and the consideration is INR 50 Lakhs or more.

2. Is TDS applicable on purchase of land?

Yes, with effect from 1st June 2013, the purchaser of the land is liable to deduct TDS in case the provisions of section 194-IA gets applicable.

3. What happens if TDS is not deducted on a property?

If the purchaser liable to deduct TDS, as per section 194-IA, fails to deduct the same, then, he would be required to pay late fee / interest @ 1% per month from the date the TDS was to be deducted till the date the TDS actually deducted.

4. What is TDS for purchase of property?

The purchaser is required to deduct TDS @ 1% on the purchase of the property if the provisions of section 194-IA gets attracted.

Also Read-

Particulars
TCS – Tax Collection at Source – A Complete Guide
TDS Rate Chart for Financial Year 2019-2020
Section 192 – TDS on Salary
Section 192A – TDS on Premature withdrawal from EPF
Section 193: TDS on Interest on Securities
Section 194 – TDS on dividend
Section 194A: TDS on interest other than interest on securities
Section 194B and Section 194BB – TDS
Section 194C – TDS on Contractors
Section 194D – TDS on insurance commission
Section 194DA – TDS in respect of Life Insurance Policy
Section 194E – TDS on payment to Non-resident Sportsmen or Sports Association
TDS under Section 194EE and Section 194F
Section 194G TDS on Commission on Sale of Lottery Tickets
Section 194H – TDS on Commission or Brokerage
Section 194I of Income Tax Act, 1961 – TDS on Rent
Section 194IB – TDS on Rent paid by Individual / HUF
Section 194LA: Payment of Compensation on acquisition of certain immovable property
TDS under Section 194LB, 194LBA, 194LBB and 194LBC
Section 194LC: TDS on income by way of interest from an Indian Company or a business trust
Section 194LD TDS on income by way of interest on certain bonds and Government Securities
Section 194J TDS on Fees for Professional or Technical Services
Section 194N – TDS on Cash Withdrawals
Section 194M: TDS on Payment of certain sum by certain Individual / HUF
Section 195 TDS on payment of any other sum to a non-resident

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