SECTION 194IA TDS ON IMMOVEABLE PROPERTY

TDS U/S 194IA: TDS ON TRANSFER OF IMMOVEABLE PROPERTY

1. What do you mean by TDS?

TDS stands for Tax Deducted at Source. TDS is a kind of tax that is deducted by the payer before making certain payments like Salary, Rent, Commission, Interest, Royalty, Professional Fees etc. to the payee.

TDS is required to be deducted at the source if the money to be paid and the money already paid exceeds a specified amount.

The Payee can claim this tax deducted by the payer while paying his income tax liability for the year, and if the TDS deducted is more than the income tax liability of the assessee then he/ she will be entitled to a refund.

The main purpose of introduction of TDS was to reduce the Tax evasion by the person receiving the income.

Note: -

Payer- A payer is a person or organization who is responsible for deducting TDS before paying the amount to Payee.

Payee- A Payee is a person or organization who receives the payment from the payee after the TDS deduction.

2.  What is TDS under Section 194IA of Income Tax Act?

Section 194IA of Income Tax Act, 1961 mandates that TDS to be deducted by the buyer when purchasing immoveable property (other than rural agriculture land), be it residential or commercial from a resident person during the F.Y.

3. What do you mean by Rural Agriculture Land?

A rural agricultural land is considered rural if:

• If located in any region under municipal control with a population fewer than 10,000 or,
• If located beyond the municipality’s boundaries, then at a distance measured –

• Greater than 2km from the municipality’s local boundaries and with a population of at least 10,000 but not more than one lakh people.
• Greater than 6km from the municipality’s local boundaries and with a population of more than 1,00,000 but not more than one million people.
• Is located more than 8Km outside the municipality’s border and is home to more than 10,00,000 people.

4. When is TDS to be deducted under Section 194IA?

TDS is required to be deducted: -

• At the time of payment.

            Or

• At the time of crediting the account of payee, whichever is earlier.

Few examples of date of deduction are: -

5. Who is required to deducts TDS under Section 194IA?

TDS is to be deducted by the buyer while purchasing immoveable property (other than rural agriculture land), be it residential or commercial from a residential seller if the value of the property (SDV or Consideration) exceeds Rs. 50,00,000.

NOTE: -

This section i.e. TDS on payments related to transfer of immoveable property is not applicable if the seller is a non-resident person.

Example: -

Mr. Josh a resident of United States sold immoveable property to Mr. Mayank in India. Does the provision of Section 194IA applies?

1. Section 194IA applies to resident individuals only, since Mr. Josh is a non-resident so the provision of Section 194IA does not apply to Mr. Josh and Mr. Mayank is not liable to deduct TDS under this section.

6. Rate of TDS under Section 194IA?

The TDS rate under this Section is: -

NOTE:

In case the PAN & AADHAR of the seller is not linked then the TDS rate will be 20% instead of 1%.

7. Exemption under Section 194IA?

No TDS if: -

• The value of consideration (SDV or Consideration) is less than Rs. 50,00,000.
• Compulsory acquisition of immoveable property.
• Transfer of rural agricultural land.

8. Time limit for deposit of TDS under Section 194IA?

The due date for deposit of TDS is as below: -

9. What is the due date for filing of TDS return under Section 194IA?

TDS is to be deposited monthly on the dates mentioned above also the statement of TDS has to be filed monthly as follows: -

10. Type of TDS return & form to be issued?

TDS under this section has to filed monthly through FORM 26QB and the deductor has to issue FORM 16B to the employee after filing of return within 15 days of filing return.

11. Fees/ Penalties for Late/ Non- Filing of TDS u/s 194IA?

Following penalties/fees will be levied if there is delay in TDS deduction or delay in deposit of TDS or non-filing of statement.

12. FREQUENTLY ASKED QUESTIONS?

Q. What is the threshold limit for TDS under 194IA?

A. The threshold limit for TDS under 194IA is Rs. 50,00,000.

Q. What do you mean by consideration under 194IA?

A. Consideration for transfer of immoveable property includes club membership fees, car parking fees, maintenance fees, advance fees, or any other similar charges incidental to transfer of immoveable property.

Q. Is 194IA applicable when purchasing immoveable property from non-resident?

A. No, this section is not applicable while purchasing immoveable property from non-resident persons.

Q. Are all agricultural land exempt from provision of 194IA?

A. No, only rural agricultural land is exempt from the provision of 194IA, urban agricultural land will attract TDS under the provisions of Section 194IA.  

Q. Is it mandatory to obtain tax deduction account number (TAN) to deduct TDS under Section 194IA?

A. No, TAN is not required to deduct TDS under Section 194IA as PAN is used for filing of 26QB statement.

Q. What do you mean by SDV?

A. It means the value adopted or assessed by any authority of a state government for the purpose of payment of stamp duty.