1. What is Section 194IA of the Income Tax Act?
Section 194IA of the Income Tax Act provides a deduction of TDS on the purchase of immovable property at the transaction time. Section 194-IA is a provision that deals in TDS (Tax Deducted at Source) on payment made for the transfer of immovable property. Earlier the income tax act, of 1961 was to facilitate TDS on the sale of immovable property by non-residents only. Under section 194 IA, any individual or buyer who is responsible for paying an amount for the transfer of the immovable property (other than agricultural land) to a resident seller shall deduct TDS at the rate of 1% from the same amount paid to the seller at the time of payment or credit, whichever is earlier. Therefore, deducting and depositing the applicable TDS is the buyer's responsibility & send to the government. In case the buyer fails to deliver TDS on time, s/he may be fallen under penalties and interest. Note: It is worth noting that this section is applicable only when the consideration for the transfer of immovable property is more than Rs. 50 lakhs. No TDS is required to be deducted under section 194IA when the consideration for the transfer is below Rs. 50 lakhs.
2. Who Needs to Deduct TDS Under Section 194IA?
As per section 194IA, the transferee (A person to whom title or ownership is conveyed.) would be responsible to deduct TDS on the transfer of immovable property. In this case, the seller or transferor must be an Indian resident and the buyer may be a non-resident. There is no TDS deduction that needs to be made if the seller is a non-resident. To understand it better, let’s look at the below-mentioned instances. There is a person named Amit (a resident of India) who wants to sell his property to Nikesh (a resident of India). The property is located in Delhi. Then, in this case, Nikesh will be required to deduct TDs under section 194IA. Taking another example- This time Amit is (a non-resident of India) who is selling his property to Nikesh (a resident of India). The property is located in Delhi. In this situation, section 194IA is applicable to deduct TDS. Thus, the buyer or transferee (Nikesh) needs to deduct TDS.
3. When to Deduct TDS On Immovable property u/s 194IA?
As per section 194IA, TDS on the immovable property should be deducted at the time of payment or credit of the amount to the seller of the property. Simply put, if the transferee paid the amount in cash, then TDS should be deducted at the time of payment. But if the payment is made in another mode rather than cash (such as cheque, demand draft, or electronic transfer), TDS should be deducted at the time of credit of the such amount to the seller's account.
4. How to pay TDS under Section 194IA of the Income Tax Act?
Deduction of TDS is mandatory if the property surpasses the prescribed limit of Rs. 50 lakhs. The buyers need to make the payment of TDS through Form 26QB. The TDS deposition should be completed within a month of the last day of the month the property sale took place. After submitting the TDS, the buyer will get form 16B which can be generated through the TRACES portal. This form 16B is to be submitted to the seller. Following are the steps to pay TDS u/s 194IA of the income tax act. TDS must be paid by using Form 26QB under Section 194IA of the Income Tax Act 1961. The TDS deposition should be completed within 30 days of the month the property sale took place. Then the buyer will get Form 16B which must be furnished to the seller. You can then download & generate form 16B from the TRACES portal.
5. Requirements of Section 194IA
Following are the requirements of section 194IA- The buyer is required to deduct the TDS rate, which is 1% of the entire sale amount. The buyer, not the seller, should be the one to deduct the TDS. No TDS is required to be withheld under Section 194IA of the Income Tax Act if the sale consideration is less than Rs. 50 lakh. If the payment is done in form of instalments then TDS will be deducted on every installment paid every month. The entire sale amount will be subject to TDS payment. Even in situations where there are multiple buyers or sellers, this condition still applies. The buyer of the immovable property does not need Tax Deduction Account Number (TAN) to pay the TDS for real estate. The buyer cal also make the payment with the PAN. The buyer must receive PAN of the seller of the immovable property for making the payment of TDS on the immovable property otherwise the TDS is deducted at the rate of 20% of the entire amount. Thus, having the PAN of both seller and the buyer is mandatory. The TDS is either deducted at the time of payment, including payments done in installments, or at the time of giving credit to the seller, whichever is earlier. This tax deducted on source for the immovable property is to be paid by using Form 26QB. It should be done within 30 days from the end of the month in which TDS was deducted. After depositing the TDS to the government, the buyer has to furnish the TDS certificate in Form 16B to the seller which is available around 10-15 days after furnishing the TDS. The TDS certificate can be downloaded from the TRACES portal.
6. Essential Things To Remember While claiming TDS u/s 194IA
Transfers of agricultural land and forced real estate acquisitions are not covered under Section 194IA. For the purpose of deducting TDS, neither the buyer nor the seller must get the TAN. Within 30 days of the end of the month in which TDS is deducted, TDS must be remitted to the credit of the Central Government. The buyer is required to deduct TDS using Form 26QB and state the PAN of the seller as compulsory. There is no requirement to file a TDS return against such a transaction. The buyer must provide Form 16B as the TDS certificate. Form 16B is usually available on the TRACES website within 10 to 15 days. The seller may adjust the TDS deduction against the tax payable when filing the income tax return.
Frequently Asked Questions
What is the rate of TDS u/s 194IA of the income tax act?
Under section 194IA, the rate of TDS deduction is 1% of the sale of the immovable property.
Are there any exemptions from TDS under Section 194IA?
Yes, there are certain exemptions from TDS under Section 194IA.
What is the time period for depositing TDS u/s 194IA?
As per section 194IA, the TDS deducted must be deposited within 30 days from the end of the month in which the deduction had done.
What is Section 194IA?
Section 194IA is a provision under the Income Tax Act that mandates the deduction of TDS on payment made for the purchase of the immovable property.
Who is liable to deduct TDS under Section 194IA?
The buyer of the immovable property is liable to deduct TDS under Section 194IA.
What is the threshold limit for TDS deduction u/s194IA of the income tax act?
The threshold limit for TDS deduction u/s 194IA of the income tax act is Rs. 50 lakhs.
What happens if TDS is not deducted under Section 194IA?
If TDS is not deducted under Section 194IA, the buyer may be penalized for non-compliance with the provisions of the Income Tax Act. The penalty can range from a minimum of Rs. 10,000 to a maximum of Rs. 1 lakh.
Is the seller required to file a return of income if TDS has been deducted under Section 194IA?
Yes, the seller is required to file a return of income even if TDS has been deducted under Section 194IA. The TDS credit can be claimed while filing the return.