Section 194IA : TDS on Purchase of Immovable Property with Latest Case Laws

TDS on Property Section 194IA

As per Section 194IA Every transferee responsible for paying any sum as consideration for transfer of immovable property (land, other than agricultural land, or building or part of building) to a resident transfer shall deduct tax, at the rate of 1% of such sum or the stamp duty value of such property, whichever is higher.

“Agricultural land”, for the purpose of this section, means rural agricultural land. In other words, transfer of urban agricultural land, will attract the provision of section 194IA, if the consideration or the stamp duty value of such land, is Rs. 50 lakhs or more.

Time of Deduction

The deduction is to be made at the time of credit of such sum to the account of the resident transferor or at the time of payment of such sum to a resident transferor, whichever is earlier.

Threshold Limit

Tax is not required to be deducted at source where the total amount of consideration for the transfer of immovable property and the stamp duty value of such property, are both, less than Rs. 50 lakhs.

Non Applicability of TDS under Section 194IA

Since tax deduction at source for compulsory acquisition of immovable property is covered under section 194LA, the provisions of section 194IA do not get attracted in the hands of the transferee in such cases.

No requirement to obtain TAN

The provisions of section 203A containing the requirement of obtaining Tax deduction account number (TAN) shall not apply to the person required to deduct tax in accordance with the provisions of section 194IA.

Meaning of consideration for transfer of immovable property

Consideration for transfer of immovable property include 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 transfer of the immovable property.

You may also like our Article on Section 194-I : TDS On Rent : A Complete Guide with latest case laws and video.

Conditions to be Satidfied for Applicability of Section 194IA

  1. The payer must be any person responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property.
  2. The payee must be a resident transferor of an immovable property
  3. The payment must be by way of consideration for transfer of any immovable property (other than agricultural land).
  4. The quantum of payment, or stamp duty value of property, must be Rs. 50 lakhs or more.
Section 194IA

Effect of non-furnishing of PAN on rate of tax

Section 206AA, as inserted with effect from 1-4-2010, provides as under:

  •   Every person whose receipts are subject to deduction of tax at source (i.e., the deductee) shall furnish his PAN to the deductor.

  •   If such person does not furnish PAN to the deductor, the deductor will deduct tax at source at higher of the following rates:

(a) the rate prescribed in the Act;

(b) at the rate in force, i.e., the rate mentioned in the Finance Act; or

(c) at the rate of 20 per cent.

Where the PAN provided to the deductor is invalid or does not belong to the deductee, it shall be deemed that the deductee has not furnished his PAN to the deductor and above provisions shall apply accordingly.

Deposit of tax to the credit of the Central Government

Any sum deducted under section 194IA 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.

The sum so deducted shall be deposited to the credit of the Central Government by remitting it electronically to the Reserve Bank of India or the State Bank of India or to any authorised bank.

Certificate for tax deducted at source

Every person responsible for deduction of tax under section 194IA 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.

Furnishing of statements by tax deductor to department

Every person responsible for deduction of tax under section 194IA 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.

Meaning of Agricultural Land

Agricultural land means agricultural lands in India, not being a land situated in any area referred to in section 2(14)(iii)(a)/(b).

A land shall not be treated as Agriculture Land, if:

a)  It is situated within jurisdiction of Municipality or Cantonment Board which has a population of not less than 10,000; or

b)  It is situated in any area within below given distance measured aerially:

Population of the Municipality Distance from Municipal limit or Cantonment Board
More than 10,000 but does not exceed 1,00,000 Within 2 kms.
More than 1,00,000 but does not exceed 10,00,000 Within 6 kms.
Exceeding 10,00,000 Within 8 kms.

Latest Case Laws on Section 194IA : TDS on Sale of Property

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