Lakesh Kumar

Lakesh Kumar

Introduction :From 1st June, 2013, the purchase of immovable property (other than rural agricultural land) is required to deduct tax at source as per provisions of section 194IA of the Income Tax Act, 1961.

However this section applicable only when sale consideration of the immovable property more than 50 Lacs.

This provision introduced by The Finance Minister to improve the reporting of such transactions and prevents the circulation of black money in Real Estate Market.

Rate of TDS under Section 194IA

TDS on transactions of immovable property is to be deducted by the purchaser of immovable property at the rate of 1%. If the seller does not furnish his PAN, then the rate of TDS would be 20%.

Who will liable to deduct & pay tax under Section 194IA 

TDS is required to deduct by the purchaser at the time of payment or at the time of credit of account, whichever is earlier. Such TDS would be deducted from the consideration being paid to seller and the tax so deducted needs to be deposited with the government.

TDS deducted by the buyer at the time of making the payment to the seller has to be deposited within a period of 7 days from the end of the month in which deduction has been made. Such payment is to be done in Form 26QB.

TAN is not mandatory for TDS deduction under Section 194IA

According the provision of Section – 203A , any person deducting TDS shall also apply for a TAN U/s 203A. This TAN is mandatory required to be quoted at the time of deducting any TDS, at the time of filling return and at the time deposit of TDS with the Govt. Without holding TAN any person not able to deducts TDS.

However Section 194IA (3) remove such hardship. Which state that a person deducting TDS on property is not mandatory required to quote TAN.

 TDS under Section 194IA on amount paid in Installment

According to Sec-194IA TDS is to be deducted at the time of payment. The date of transfer is not relevant. It is not required to be deducted at the time of transfer but is required to be deducted at the time of payment.

So even if advance payment is being made TDS would be required to be deducted. In case the payment is being made in installments to the seller, then TDS would be deducted at the time of paying each installment.

TDS under Section 194IA in case of More than one Buyer or Seller

In case where more than one buyer or seller and individual purchase price of each buyer is less than 50 lacs, but the aggregate value of transaction exceed Rs 50 Lacs, then Sec-194 IA would be applicable and TDS on such property required to be deducted and deposit with the Govt. before Due date.

TDS under Section 194IA in case when property is Finance through Bank 

Provision will also apply even when property is financed through a bank loan. Buyer will have to ensure that he himself or bank deducts tax before disbursing the loan to the seller.

Key Notes on TDS  under Section 194IA

1) TDS is required to be deducted even in the case where the capital gains  is  exempt U/s 54.

2) Provision of Sec-203A will not apply.

3) TDS on Immovable property deducted only if transaction is above Rs. 50 Lacs.

4) On TDS is required in case of transfer of Agriculture land.

5) The TDS Certificate shall be issued in Form 16B within 15 days from the due date of deposit.

6) Provision will also apply in case when part of the total payment made before 1st June, 2013 and remaining part is disbursed after 1st June, 2013.

7)  TDS needs to be deducted even in case of advance payment.

8) The provision will also apply even in case where buyer bought an under construction property prior to the provision coming into effect but he has to make the balance payment after 1st June, 2013.

( Author is a CA Student and can be reached at E-Mail-: lakeshkr@gmail.com)

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17 Comments

  1. Nadeem Malik says:

    I m going to purchase a plot in a sector from a agriculturist who’s has been allotted this plot on land pooling basis, the land is in the name of 3 persons n none of them are having PAN cards. Plz advise whether TDS is applicable in this case n if yes then how to pay TDS without pan cards
    Thanks in advance

  2. Salim Sayed says:

    I am planning to start a goat farm in Pune district. Please let me know how much will be TDS % in this business. Also please let me know if its depends on my income slab.

    Thanks in advance.

  3. Niyati Shah says:

    To,
    Lakesh Kumar.

    I have maid e-payment for TDS on property but the thing is i have selected wrong financial year. The amt has already been credited to my three sellers.So now what should i do to rectify the same.Please do the needful.

  4. Manik Seth says:

    Please guide us as to how to obtain Form 16B (TDS Certificate) from TRACES,we have e-file TDS through 26QB,party is demanding TDS Certificate.

  5. ajit bhamre says:

    I have booked a flat priced Rs. 68 lacs in May 2011 with a properly registered sale agreement in sub registar’s office and have paid Rs.58 lacs till May 2013. Balance amount Rs.10 lacs is now to paid before taking possession. Please clarify my TDS lialility.( 1% on Rs.68 lacs or 10 lacs?)
    —–ajit bhame

  6. Ram S says:

    Though people after people write this there is one wording i read some where that it is applicable when it is published in the official gazette. That is why the conjunction period of starting date of implementation transactions it is a widely confusing as the Registrar of Regn. in Tamil Nadu says they have not received any notification. Please clarify.

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