What is Section 194IA?
Section 194IA provides for deduction of TDS on purchase of immovable property at the time of the transaction. Until the introduction of section 194IA, the Income Tax Act, 1961 provided for TDS on sale of immovable property by a non-resident and compulsory acquisition of certain immovable properties. The Finance Act, 2013 introduced section 194IA to capture the transaction of purchase of immovable property by a resident taxpayer.
Any person, being a transferee, is responsible for paying an amount as a consideration to a resident transferor against a transfer of any immovable property must deduct TDS. The sale consideration must be greater than Rs 50 lakhs.
Let us understand with the help of the following illustrations
|Mr. Arun, a resident of India, sells his house to Mr. Amit, a resident of India. The house is situated in Mumbai. Sale Consideration Rs 90 lakhs||Mr. Amit needs to deduct TDS under section 194IA on Rs 90 lakhs.|
|Mr. Arun, non resident, sells his house to Mr. Amit, a resident of India. The house is situated in Mumbai. Sale Consideration Rs 30 lakhs||Mr. Amit need not deduct TDS under section 194IA as the transaction value is less than Rs 50 lakhs.|
|Immovable Property||An immovable property for this purpose is any land (other than agricultural land) or any building or part of a building.|
|Agricultural Land||An “agricultural land” means agricultural land in India, not being land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2|
|consideration for transfer of any immovable property||All charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee, or any other charges of similar nature, which are incidental to the transfer of the immovable property;|
Who is Responsible for Deducting TDS Under Section 194IA of Income Tax Act?
The transferee is responsible to deduct TDS. The transferee in this case is the purchaser of the immovable property. Moreover, such a transferee may be a resident or a non-resident. However, the transferor or the seller must be a resident. If the seller is a non-resident taxpayer then TDS under section 194IA of Income Tax Act is not applicable. However, TDS must be deducted under section 195 in such a case.
Let us understand with the help of the following illustrations.
|Mr. Arun, a resident of India, sells his house to Mr. Amit, a resident of India. The house is situated in Mumbai||Purchaser- Mr. Amit, resident of India|
Seller- Mr. Arun, resident of IndiaMr.
Amit needs to deduct TDS under section 194IA
|Mr. Arun, non resident, sells his house to Mr. Amit, a resident of India. The house is situated in Mumbai||Purchaser- Mr. Amit, non resident |
Seller- Mr. Arun, resident of India
Mr. Amit needs to deduct TDS under section 194IA
|Miss. Aruna, a resident of India, sells his house to Mr. Amit, non resident. The house is situated in Mumbai||Buyer- Mr. Amit, resident of India |
Seller- Miss. Aruna, non resident.
Section 194IA is not applicable. TDS must be deducted under section 195
When to Deduct TDS Under Section 194IA?
The purchaser must deduct TDS on the following occasion, whichever is earlier
- at the time of credit of such sum to the account of the transferor
- at the time of payment of such sum in cash or by the issue of a cheque or draft or by any other mode
Rate of TDS on Purchase of Immovable Property
- The rate of TDS on the purchase of immovable property under section 194IA of Income Tax Act is Rs 1% of the total transaction value.
- The deductor must not add any surcharge and Health & Education Cess to the above rate. Hence, TDS deduction must be at the basic rate.
- If the seller does not quote the PAN then the rate of TDS will be 20%.
Things To Remember when claiming TDS under u/s 194IA
- Section 194IA is not applicable on a transfer of agricultural land and compulsory acquisition of immovable property.
- Neither the buyer nor the seller needs to obtain the TAN for deduction of TDS
- TDS must be deposited to the credit of the Central Government within 30 days from the end of the month in which TDS is deducted.
- The buyer must pay TDS using Form 26QB and mention the seller’s PAN mandatorily.
- There is no requirement of filing a TDS return against such a transaction.
- The buyer must provide Form 16B as the TDS certificate. Form 16B is usually available within 10 to 15 days on the TRACES website.
- The seller may adjust the TDS deduction against the tax payable at the time of filing the income tax return.
- At the time of making the payment of TDS always ensure to enter the mandatory fields correctly. Such details are PAN, assessment year, amount of TDS, Head of payment, i.e., Corporation Tax/Income-tax (other than companies), and type of payment i.e. TDS.
Non-Payment of TDS
The income tax department receives the Annual Information Return (AIR) from the registrar and sub-registrar office. Such AIR contains the information of purchase and sale of any immovable property along with the value. Hence, if a purchaser does not deduct TDS, does not deposit TDS, deducts TDS at a lower rate the income tax department tracks it. The income tax department will send a notice for such default to the purchaser. Depending on the type of default, interest on no TDS deduction, interest on non-payment, penalty, and prosecution will be applicable.
The implication of Default For the Purchaser
- Interest on no TDS deduction, interest on low TDS deduction, or interest on non payment of TDS to the credit of Central Government.
- A penalty fee of Rs 200 per day for default in non-filing of Form 26QB under section 234E of the Income Tax Act, 1961.
The implication of Default For the Purchaser
- No interest, penalty, or prosecution against the seller in the case of non deduction or non payment of TDS
- If TDS is deducted and not paid by the buyer then the seller will not be able to claim the TDS deduction. This will lead to a higher tax liability for the seller. Hence, the seller must be aware of the tax provisions and ensure that the buyer adheres to the provisions.
Frequently Asked Questions
The rate of TDS on the sale of a property is 1% of the transaction amount or the consideration of the sale. The purchaser must deduct TDS and make the residual payment to the seller. TDS under section 194IA is applicable only if the sale consideration is more than Rs 50 lakhs.
You can claim TDS under section 194IA at the time of filing your income tax return. The purchaser is responsible to deduct TDS at the time of making the transaction of sale of immovable property. The purchaser deducts the TDS and pays the rest of the amount to the seller. The seller can claim the TDS deducted at the time of filing the income tax return.
The time limit to pay TDS on the sale of immovable property is 30 days from the end of the month in which the TDS is deducted. The TDS must be deducted at the earliest of credit of sale value to the account of the seller or payment of sale value in cash or by the issue of a cheque or draft or by any other mode.
No, the buyer of the immovable property need not obtain TAN to deduct TDS under section 194IA. However, the buyer must quote their PAN correctly and mandatorily.
In case you have misplaced the acknowledgment slip you can easily access the slip. Visit the TIN website and go to ‘View/Payment of TDS on property”. Now, enter the details of the transaction as requested. You will be provided options to either Print the Acknowledgment Slip.
Form 16B is the TDS certificate that must be issued by the deductor of TDS or Buyer of property to the deductee or seller of property. Form 16B provides details of the taxes deducted and deposited to the credit of the Central Government. Form 16B will be available for download from the website of Centralized Processing Cell of TDS (CPC-TDS) www.tdscpc.gov.in