TDS on Sale of Immovable Property (Sec 194IA)-Detailed Overview

The provisions of this section states that TDS on sale of Immovable Property should be deducted at source from payment on transfer of immovable properties (other than agricultural land) where the total consideration paid or payable is more than Rs 50,00,000/-. Earlier, there was no such deduction in case of immovable properties, as it is in the case of salary, interest, rent etc.

Any person responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), is liable to deduct tax at source under section 194-IA.

Where the total consideration is less than Rs 50,00,000 /-, the liability to deduct tax at source will not arise.

Rate at which TDS shall be deducted:
Tax is deductible at the rate of 1% of the consideration payable to a resident transferor. If a valid PAN is not provided by the seller, the tax rate would go up to 20%.

Obtaining TAN:
Purchaser is not required to obtain a TAN for deduction of tax.

Payment and Return of TDS:
Tax shall be deducted at the time of payment or at the time of giving credit to the transferor, whichever is earlier. If advance payment is being made then TDS would be required to be deducted at the time of advance payment itself. And if instalment payment is made, the TDS would be required to be deducted at each such instalment. The tax deducted shall be paid to the credit of Central Government within a period of seven days from the end of the month of deduction. Online payment u/s 194IA is mandatory and the tax should be deposited on challan-cum-statement on Form No.26QB. Form No 16B (TDS Certificate) will be issued by the deductor within fifteen days from the due date of depositing tax.

The new Form No. 26QB, which is a challan-cum statement of deduction of tax under section 194 IA contains certain important details which are required to be filled up while making payment of TDS in respect of purchase of the property for the value of Rs. 50 Lakhs or above.

Some of the important columns in the new Form No. 26QB which is a challan-cum statement for deduction of tax are as under:
• Full name of the transferee/payer/buyer
• Complete address of the transferee/payer/buyer
• Full name of the transferor/payee/seller
• Complete address of the transferor/payee/seller
• Complete address of the property transferred
• Date of agreement/booking
• Total value of Consideration Rupees
• Payment in instalment or lump sum
• Amount paid/credited
• Date of payment/credit
• Rate at which tax deducted
• Amount of tax deducted at source
• Date of deduction
• Date of payment of tax deducted at source
• TDS (Income-tax) Credit of tax to the deductee shall be given from this amount.

The above mentioned columns should more particularly be filled up carefully in the challan-cum statement for deduction of tax under section 194IA. Likewise, once the tax has been deducted at source, the purchaser should also prepare Form No. 16B which will be generated electronically on the Government’s website should be downloaded and sent to the seller.

This Form No. 16B being certificate for tax deducted at source from the seller contains the various details relating to the name and address of the deductor, name and address of the deductee, the PAN Number of the deductor and the deductee as also summary of the transaction.

All those persons who are deducting tax at source in respect of payment made to the seller for purchase of property of the value of Rs. 50 Lakhs or above should ensure that the TDS certificate is given in this new Form No. 16B only and not in any of the earlier existing forms for TDS certificates.

Applicability of section:
Section 194IA is only attracted for the transactions on or after 1st June, 2013.
For example: Sale agreement is made before 1st June, 2013 but consideration received after 1st June, 2013 – Sec 194IA is not applicable. Advance consideration of Rs 50,00,000 or more is received before 1st June, 2013 but sale agreement made after 1st June, 2013. – Section 194IA is not applicable.

Where property is held by Joint-Owners: In case of joint owners, the threshold limit of Rs 50,00,000/- is to be determined property-wise and not transferee-wise. The number of buyer or seller would not matter at all. The value of property should be more than Rs 50 00,000/- for applicability of deduction of tax.

For example: A, B and C jointly purchased an immovable property. The purchase price for each owner is Rs 20lakhs, Rs 15 Lakhs and Rs 35 Lakhs respectively. In this case individual purchase price is less than Rs 50,00,000 but the aggregate value of the transaction is exceeds Rs 50,00,000. Thus section 194-IA would be applicable.

Scope: Section 194-IA is applicable to all including relatives, minor, senior citizens etc. However, if transfer is made without payment of any consideration like in case of gift, then this section will not apply.

Provisions for Non Resident Indian: If payment is made to a Non-Resident then section 194-IA will not be applicable. Rather section 195 will be attracted and TDS is required to be deducted @ 20% + EC & SHEC on the sale consideration. Surcharge @ 10% will be applicable if amount paid exceeds Rs 1 crore. The limit of Rs 50,00,000/- is not applicable in case of payments made to NRI’s.

Non Compliance: In case of failure to comply with the provisions, interest and penalty would be imposed to the purchaser. Interest will be charged @ 1% p.m or part of the month for failure to deduct tax or short deduction of tax from the date the tax was deductible till the date the same is deducted. Interest will be charged @ 1.5% p.m or part of the month for tax deducted but not paid to the government from the date of deduction till the date of actual payment.

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