Section 194IA: TDS on Immovable Property Transfer (Excluding Agricultural Land)
Applicability of TDS Under Section 194IA: This section mandates the deduction of Tax Deducted at Source (TDS) when immovable property, excluding agricultural land, is transferred. It applies if the property value is Rs 50 Lakh or more, covering all types of immovable property such as flats, apartments, houses, land (vacant plots or undeveloped land), and commercial buildings.
Responsibility to Deduct TDS: Any individual or entity responsible for paying a resident transferor for the transfer of immovable property is required to deduct TDS under Section 194IA.
Rate of TDS:
- The TDS rate is 1% if the recipient provides a Permanent Account Number (PAN).
- If the recipient does not furnish a PAN, the rate is 20%, calculated on the higher of the consideration or stamp duty value.
- No surcharge or education cess is added; only the basic 1% rate applies.
Timing of TDS Deduction: TDS should be deducted either at the time of payment (whether by cash, cheque, draft, or other means) or when credit is given to the transferor in the transferee’s books, whichever is earlier.
TAN Provision: The provision of Section 203A does not apply to TDS under Section 194IA, meaning the deductor does not need a Tax Deduction and Collection Account Number (TAN).
Threshold Limit: No TDS is required if the consideration is less than Rs 50 Lakh. If the amount meets or exceeds Rs 50 Lakh, TDS is deducted on the entire amount, not just the excess over Rs 50 Lakh. When multiple buyers or sellers are involved, the total property value determines the Rs 50 Lakh threshold, not individual shares.
Exemptions from Section 194IA:
- Acquisition of rural agricultural land in India as defined in Section 2(14)(iii) of the Income Tax Act, 1961.
- If the sale consideration or stamp duty value is less than Rs 50 Lakh.
- The transferor is a non-resident in India.
- The property transfer is under compulsory acquisition.
Definition of Consideration: Consideration includes all incidental charges like club membership fees, electricity or water facility fees, maintenance fees, advance fees, or similar charges related to the property transfer. The stamp duty value is the amount assessed by government authorities for stamp duty purposes.
Deposit and Documentation of TDS:
- TDS must be deposited to the government within 30 days from the end of the month in which it was deducted, along with a challan-cum-statement in Form No. 26QB.
- The deductor must issue a TDS certificate in Form No. 16B to the payee within 15 days from the due date of Form No. 26QB.
Handling Multiple Buyers or Sellers: Each buyer must fill in the challan and Form 26QB for their respective share of the sellers. TDS should be deducted on each installment if payment is made in parts. For NRIs, TDS on immovable property falls under Section 195.
Penalties and Interest for Non-compliance:
- Failure to deduct TDS results in a 1% per month interest on the amount not deducted, from the date it was due until actual deduction.
- Failure to pay deducted TDS incurs a 1.5% per month interest from the deduction date until payment.
- Late filing of TDS returns incurs a Rs 200 per day penalty, capped at the TDS amount due.
- The Income Tax Officer can levy a penalty ranging from Rs 10,000 to Rs 1 Lakh for late deposit of TDS on property under Section 271(H)(2).
