Applicability, rate of tax & Tome of Deduction for TDS under Section 194IA on Sale of Immovable Properties

-Any transferee responsible for paying any sum of consideration to a resident transferor on transfer of immovable property (other than agricultural land)

-Need to deduct TDS on such sum.

-Rate of Tax – 1%

-TDS is need to be deducted at the

Earlier of the Following

(i) At the time of credit of such sum to the account of the transferor.

OR

(ii) At the time of payment through cash or by cheque or draft or by any other mode.

TDS on Sale of Immovable Properties

Threshold limit 

  • TDS needs to be deducted only when the Consideration Money > Rs. 50 Lakhs
  • For Example: 1st Case: ‘X’ purchased a house from ‘Y’ for Rs. 48,00,000.

2nd Case: ‘X’ purchased a house from ‘Y’ for Rs. 51,00,000.

So, in the 1st case as the Consideration money < Rs. 50 Lakhs, there is no need of deduction of tax.

But in the 2nd Case as the Consideration money > Rs. 50 Lakhs, TDS is to be done @ 1% on the amount of Rs. 51,00,000, not on the  excess amount Rs. 1,00,000 (Rs.51,00,000 – Rs. 50,00,000).

Note: The exemption of Rs. 50 lakh in Sec. 194-IA(2) is applicable w.r.t. the amount related to each transferee and not with reference to the amount as per sale deed. Each transferee is a separate income tax entity and the law has to be applied with reference to each transferee as an individual transferee / person.

So in the case of Joint Buyers, the Tax is not required to be deducted if the Individual’s Share in a purchase consideration to acquire an immovable property does not exceed Rs. 50Lakh.

For Example: 1st case- ‘X’ and ‘Y’ jointly purchased a house from ‘Z’ for Rs. 60,00,000.

2nd Case – ‘X’ and ‘Y’ jointly purchased a house from ‘Z’ for Rs. 1,20,00,000.

So in the 1st case, even though the Total Consideration value is more than Rs. 50 Lakhs, there is no need of deduction of tax, as individual share of ‘X’ and ‘Y’ is less than Rs. 50 Lakhs.

But in the 2nd case, TDS need to be done because the total Consideration value as well as individual share of ‘X’ and ‘Y’ is more than Rs. 50Lakh.

Other Provisions related to Sec 194IA

  • Since TDS on Compulsory acquisition of immovable property is covered u/s 194LA, so the provisions of 194IA will not applicable in such cases.
  • No need to obtain TAN u/s 203A to the person required to deduct tax.

Time and mode of payment of TDS u/s 194IA

i) Such sum deducted u/s 194IA need to be paid to Govt with in 30 days from the end of the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form 26QB.

E.g. ‘X’ purchased a house from ‘Y’ on 14.05.2020 for Rs. 62 Lakh and paid the money on 20.05.2020 after deducting tax @ 1% (TDS- Rs. 62000). So the TDS amount of Rs. 62,000 is need to be paid to the Govt within 30.06.2020 accompanied by the challan-cum-statement Form 26QB.

ii) Every person responsible for deduction of tax u/s 194IA shall furnish TDS certificate in Form No 16B to the payee with in 15 days from the due date for furnishing challan-cum-statement in Form No 26QB.

So in the above example ‘X’ shall furnish TDS certificate in form 16B to ‘Y’ with in 15.07.2020.

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30 Comments

  1. Pankaj says:

    if any buyer purchases two properties from the same seller by two separate agreements each agreement has below 50 lakhs value but value of both the properties is 70 lakhs, is the buyer required to deductTDS ?

  2. Mani says:

    If any buyer purchases two properties from the same seller by two separate agreements each agreement has below 50 lakhs value but value of both the properties is 70 lakhs, is the buyer required to deductTDS ? how two properties to be shown which each are below 50 lakhs

  3. Ashish Joshi says:

    Dear sir/madam,
    Myself and my cousin had jointly purchased a land and then given to redevelopment. Land cost was 12 lakhs on paper and deal was 40:60. 40% on our side. Now, we have received 53 lakhs and the developer has deducted the tds of 1%. Do we need to declare the total amount and pay 20% tds on the profit?

  4. Laxman Kumar Ruhela says:

    Madam,
    I want to purchase a constructed property of Rs.70,00000/-( Rs.Seventy Kakh) in joint name 50% each part. Is ant income tax/TDS liability in such tranction.
    Regards

  5. Laxman Kumar Ruhela says:

    Madam,
    I want to purchase a constructed property of Rs.70,00000/-( Rs.Seventy Kakh) in joint name 50% each part. Is ant income tax liability in such case.
    Regards

  6. Jitendra Balad says:

    flat purchase for 1.10 cr by two persons with equal ratio. Both wish to deduct TDS. Then TDS is to be deducted by both the buyer showing consideration as 55 lac in each form 26 QB ?

  7. AMIT KUMAR GUPTA says:

    Sir, I bought a residential plot in 2008 at 30 lacs. But project got delayed and now as new circle rate the plot cost is 55 lacs for registration purpose. Builder says O will have to pay tds even the actual cost is 30 lacs.

  8. Surinder Kumar Sharma says:

    My friend alongwith his wife (jointly) are to purchase one plot from other couple for a amount of 7200000/- (seventy two lac)
    Should my friend deduct TDS for this transaction. Pls clarify.

  9. Priya says:

    Hi Mam,
    My husband and myself jointly purchased a flat from builder for 68 lakhs. My husband is an NRI and I reside in India. Please explain ,how do we proceed with the TDS here.

  10. Nishant says:

    I bought a property worth 50 lakhs in joint name from the seller who owns the property in joint name. I paid the amount through loan taken from bank and equally paid to both the seller without deducting TDS. Just wanted to know I am applicable to pay tds on the said property. If yes reason??? I bought this property on 21 jan and till date I have not paid TDS

  11. Nishant says:

    I bought a property worth 50 lakhs in joint name from the seller who owns the property in joint name. I paid the amount through loan taken from bank and equally paid to both the seller without deducting TDS. Just wanted to know I am applicable to pay tds on the said property. If yes reason???

  12. Ashish Kumar says:

    Madam, I have purchased a house as a single borrower that costs around 65 Lac in June 2019, I have paid 50 lac through bank loan and remaining through my savings, do I need to pay this TDS?

  13. CA Madhavi says:

    Very informative article Priyanka,
    My query is, in your example both X and Y are buying the property from Z for Rs.60 Lakhs. Suppose Z is buying from X and Y for Rs.60 Lakhs should Z deduct TDS or not?

  14. Santosh sabat says:

    I have purchased shop no 101 for Rs.40.00 lakhs from the builder and shop no 102 for Rs.35.00 lakhs from the same builder in the same year.

    Shall I liable to deduct TDS u/s 194IA of the IT ACT

  15. Santosh sabat says:

    What will be the TDS on purchase of flat from a non-resident being a person of Indian origin. The consideration is paid in INR to his indian bank account.

    Can the seller (non-resident) avail benefit of deduction of long term capital gain u/s 54EC on purchase of bond.

  16. Shiva says:

    Mam, very good article… My query..In case Banks Authorised officer sold property of more than 50 lacs value of borrower by taking possession under SARFAESI Act, whether TDS need to be deducted by purchaser, if yes, whose PAN TDS be credited i.e Bank PAN or Borrower PAN. Here property of Borrower is being sold by Bank authorised officer under statutory power.

    Broad questions is Whether section 194 1A applicable for properties sold by Statutory Authority like Court, Recovery officer of DRT, Authorised officer of Bank etc..

    Pls offer your views if possible..

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