Section 194IA of Income Tax Act:
- Any person, being a transferee 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 this section.
- But if the immovable property purchased from non-resident person for any value then TDS is not required to be deducted under this section. However, TDS shall be deducted under section 195.
- As per Section 194IA of the Income Tax Act TDS is applicable consideration on transfer of immovable properties by a resident transferor if the property is worth more than Rs 50 lakhs, a buyer is required to deduct and pay 1% of the transaction cost as TDS
Amendment:
TDS under section 194IA is applicable if consideration or Stamp Duty Value is 50 lakhs or More.
Time for Deduction of TDS:
Tax shall be deducted under this section earlier of the following
- At the time of credit to the account of the payee or
- At the time of actual payment thereof
Threshold Limit u/s 194IA:
Tax is required to deductible where the consideration or Stamp Duty Value paid or payable for the transfer of an immovable property is ₹ 50,00,000 or more at the rate 1%.
Rate of TDS under Section 194IA:
- Tax shall be deducted at the rate of 1%
- The rate of TDS will be 20% in all cases, if PAN is not quoted by the transferor.
Illustrations for More Understanding:
Example-1
Mr. Santosh, a resident, acquired a house property at Mumbai from Mr. Naveen for a consideration of 190 lakhs, on 20.6.2022 and SDV on same date is 92 Lakhs.
Solution
Since the consideration or SDV for transfer of house, property at Mumbai 50 lakhs or more, Mr. Santosh, being the transferee, is required to deduct tax@1% u/s 194-IA on 92 lakhs , being the amount of consideration or SDV, whichever is higher, for transfer of property. So here the TDS amount is 92,000 required to deduct.
Example-2
Mr. Santosh made two separate transactions, thereby acquiring an urban plot in Kolkata from Mr. Naveen or a sum of Rs 49,50,000 and SDV on same date is 49,30,000 and rural agricultural land from Mr. Pratysh for a consideration of Rs 60 lakhs.
Solution
Mr. Santosh is not required to deduct tax as source u/s 194-IA from the consideration of 49,50,000 paid to Mr. Naveen for transfer of urban plot, since the consideration and SDV less than 50 lakh.
Mr. Santosh is also not required to deduct tax at source u/s 194-1A from the consideration of 60 lakhs paid to Mr. Pratyush for transfer of rural agricultural land, since the same is specifically excluded from the scope of immovable property for the purpose of tax deduction u/s 194-IA.
Note- Section 194-IA requires 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 deduct tax, at the rate of 1% of such sum or SDV whichever is higer, at the time to credit of such sum to the account of the resident transferor or at the time of payment of such sum to the resident transferor, whichever is earlier. However, no tax is required to be deducted where the consideration and SDV for transfer of an immovable property is less than 50 lakhs.
Cases in which Section 194IA is not applicable:
In the following cases section 194IA is not applicable
- The immovable property transferred is a rural agricultural land.
- The immovable property has been compulsory acquired under any law.
- The total amount of consideration for the transfer of immovable property is less than Rs.50,00,000/-
- Where the transferor is a Non-Resident. In this case section 195 will be attracted.
What is Form 26QB and how deducted tax shall be deposited with the government?
- TDS under section 194IB shall be deposited to the government within 7days of next month in challan Form 26QB.
- Form 26QB shall be furnished within 30 days from the end of the month in which deduction is made.
- Deductors under Section 194-IA has been provided with an exception and they can file TDS return without TAN and a separate Return cum Challan Form 26QB has been provided to facilitate deductors without TAN to file TDS return for the purpose of Section 194-IA.
- Deductor shall issue Form 16B to the payee within 15 days from the due date for furnishing Form 26QB and Form 16B can be generated and downloaded from TRACES – TDS
Procedure to generate and download Form16B from TRACES:
- Click here to register as taxpayer on TRACES with details of PAN and either detail of tax deducted or details of challan or details of Form 26QB. Also, enter the verification code and click on ‘Proceed’. Activation link will be sent to email id through which account can be successfully created
- If already registered login to TRACES here with username as ‘PAN’ and password
- Under downloads tab Select ‘Form 16B (For Buyer)’
- Furnish details such as assessment year, acknowledgment no. of the Form 26QB and PAN of the seller
- Form 16B will now be available on requested downloads section under Downloads category
- Form 16B can now be printed/saved
