SECTION 194LA TDS ON COMPULSORY ACQUISITION OF IMMOVEABLE PROPERTY

SECTION 194LA: COMPENSATION ON COMPULSORY ACQUISITION

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 194LA of Income Tax Act?

Section 194LA of Income Tax Act, 1961 mandates that TDS to be deducted while paying compensation related to compulsory acquisition of immoveable property.

3. When is TDS to be deducted under Section 194LA?

Normally the TDS is to be deducted at the time of payment or at the time of crediting the party in the books of accounts but in case of TDS u/s 194LA the TDS must be deducted at the time of payment only.

Few examples of date of deduction are: -

4. Who is required to deducts TDS under Section 194LA?

Any person paying to a resident payee any amount related to compensation on compulsory acquisition of Immoveable Property when the compensation exceeds Rs. 5,00,000 in a Financial Year.

NOTE: -

This section i.e. TDS on payments related to compensation of compulsory acquisition of Immoveable Property is not applicable when the payee is non- resident.

Example: -

Q. Mr. Debendra had a property in the Delhi region due to the construction of metro in the region government acquired his property and paid him Rs. 1 crore as a compensation. Discuss the TDS implications?

A. As per Section 194LA the payer is required to deduct TDS for compensation paid for compulsory acquisition of immovable property.

In the give case government paid Rs. 2 crores as compensation to Mr. Dev for acquisition of his property and since the amount is greater than Rs. 5,00,000 they are liable to deduct TDS u/s 194LA @ 10%.

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5. Rate of TDS under Section 194LA?

The TDS rate under this Section is: -

6. Exemption under Section 194LA?

No TDS if: -

• Payment is upto Rs. 5,00,000 in a Financial Year.
• Payment is made to non-resident.
• The payer has obtained a lower or no deduction certificate.
• The immoveable property is an “Urban or Rural Agricultural Land” in India.

7. 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.

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

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

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

TDS is to be deposited monthly on the dates mentioned above but the return is to be filed quarterly on or before the below mentioned dates: -

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

TDS under this section has to filed quarterly through FORM 26Q and the deductor has to issue FORM 16A to the employee after filing of return.

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

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

12. FREQUENTLY ASKED QUESTIONS?

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

A. The threshold limit for TDS under 194LA is Rs. 5,00,000.

Q. Is Section 194LA applicable when the payee is a non-resident?

A. NO, this section does not apply when the payee is non-resident.

Q. What do you mean by agriculture Land?

A. Immoveable property means any land (other than agricultural land) or any building or part of building.

Q. When is TDS to be deducted u/s 194LA?

A. TDS is to be deducted at the time of payment only.