Any person purchasing an immovable property (other than an agricultural land) of Rs. 50 lacs or more is required to deduct TDS @1% from payment made to the seller. (Section 194IA* of the Income Tax Act).
No deduction of tax is required under this Act, where the consideration for transfer of the property is less than Rs. 50 Lac.
*This new section was introduced by the Finance Act, 2013.
Explanation –
Agricultural Land means agricultural land in India, not being a 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” shall include all charges of the nature of
(a) club membership fee,
(b) car parking fee,
(c) electricity or water facility fee,
(d) maintenance fee,
(e) advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property.
Immovable Property means any land (other than an agricultural land) or any building or part of a building.
Time of tax deduction :- Tax shall be deducted at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
Rate of TDS :- Tax shall be deducted @ 1%
Tax deduction and collection account number (TAN) : – Provisions pertaining to Tax Deduction and Collection Account Number, i.e., section 203A, shall not apply to a person deducting tax at source under Section 194-IA.
Deposit of Tax deducted :- Any sum deducted under section 194-IA shall be paid to the credit of the Central Government within a period of thirty days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QB.
TDS Certificate: – Every person responsible for deduction of tax under section 194-IA shall furnish the certificate of deduction of tax at source in Form No. 16B to the payee within fifteen days from the due date for furnishing the Challan-cum-statement in Form No. 26QB under Rule 31A after generating and downloading the same from the web portal specified by the Director General of Income-tax (System) or the person authorised by him (TRACES).
Furnishing of statements by tax deductor to department: Every person responsible for deduction of tax under section 194-IA shall furnish to the Director General of Income-tax (System) or the person authorised by him a challan-cum-statement in Form No. 26QB electronically within 30 days from the end of the month in which the deduction is made. CPC-TDS has also enabled the online functionality for correction in Form No. 26QB.
Example :- If an individual purchases a property worth Rs. 80 Lacs, TDS @ 1% is applicable on the full amount (i.e. Rs. 80 Lacs and not Rs. 30 Lacs). Total TDS to be deducted and deposited in this case would be 1% of Rs. 80 Lacs; i.e. Rs. 80,000. No surcharge or education cess is applicable in this case.
Please note that – If the PAN of seller of the property is not quoted then the applicable rate of TDS would be 20%.
Scenarios where 194-IA is not applicable
(a) The immovable property transferred is a rural agricultural land.
(b) The Total amount of consideration paid/payable for the immovable property is less than Rs. 50 lacs
(c) If the transferor is a non-resident. In such case section 195 will be applicable.
(d) If the immovable property is acquired under any law.
If you have any questions regarding section 194IA, or need any help in depositing TDS on transfer/ purchase of immovable property, please reach out to us at argarodia@gmail.com
References: https://incometaxindia.gov.in/Charts%20%20Tables/TDS%20Purchase%20of%20Immovable%20property.htm
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