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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6 Comments

  1. 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

    1. CA Priyanka Sahu says:

      If u have made two different purchase agreements, then Sec 194IA won’t be applicable as the consideration money for each shop (in each purchase agreement) is less than Rs.50 Lakh.

  2. 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.

    1. CA Priyanka Sahu says:

      As per section 194IA,TDS is deducted @ 1% and this provision is applicable when both the transferor and transferee are resident in India. In this case, TDS applies if the consideration for the property exceeds ₹50 lakh.
      Where a resident purchases a property from a non resident, TDS is to be deducted as per the provisions of Sec 195 of the Income Tax Act i.e. TDS is deducted @ 20% in case of long term capital gains and @ 30% for short-term capital gains. There is no minimum threshold applicable for deduction of TDS; therefore, TDS will apply where the consideration is less than ₹50 lakh as well.
      NRIs are allowed to claim exemptions under Section 54EC on long term capital gains from sale of house property in India.

  3. 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..

    1. CA Priyanka Sahu says:

      Nice point raised..in this case the Bank PAN will be credited as the Bank become the beneficial owner after taking possession of the property..n the new purchase agreement will be made between Bank and the purchaser..I hope this may satisfy ur query..
      I hope other experts may give their suggestions.

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