Section 194IA Guide

Section 194IA of the Income Tax Act, 1961, mandates Tax Deducted at Source (TDS) on the sale of immovable property in India. If a property is sold for ₹50 lakh or more, the buyer must deduct TDS at 1% of the total sale consideration. The deducted amount must be deposited with the government using Form 26QB within 30 days of deduction. The seller can claim this TDS as a tax credit while filing returns. This provision ensures tax compliance in property transactions and applies to all buyers, except in cases where the seller is a non-resident (NRIs fall under Section 195). Proper filing of TDS helps avoid penalties and legal issues.

What is Section 194IA of Income Tax Act?

Section 194IA is a clause in the Income Tax Act that mandates the deduction of TDS when purchasing immovable property, be it residential or commercial. It applies to transactions where the sale consideration is equal to or exceeds Rs. 50 lakh. The primary goal of this provision is to ensure tax compliance and prevent property tax evasion in property transactions.

TDS on Sale of Immovable Property Under Section 194-IA of Income Tax Act

As per Section 194IA of the Income Tax Act, any buyer purchasing an immovable property (excluding agricultural land) worth ₹50 lakh or more must deduct TDS at 1% of the sale value. The buyer is responsible for depositing this TDS with the government using Form 26QB within 30 days from the end of the month in which the deduction is made. Failure to comply may result in penalties and interest.

Section 194IA - TDS on Property Sales by NRIs

Section 194IA applies only to resident sellers. If a Non-Resident Indian (NRI) sells property in India, TDS is deducted under Section 195 instead. In such cases, the TDS rate varies based on capital gains—typically 20% for long-term gains plus applicable surcharge and cess. The buyer must obtain a Tax Deduction and Collection Account Number (TAN) and deduct TDS before making payment to the NRI seller.

Section 194IA - Documents Required for Filing TDS on Immovable Property Sale

To file TDS on the sale of immovable property under Section 194IA, the buyer needs essential documents such as the PAN of both buyer and seller, property sale agreement, Form 26QB for TDS payment, and proof of payment like challan receipt. Additionally, the buyer must issue Form 16B to the seller as TDS proof. Ensuring accurate documentation helps in smooth compliance and avoids penalties.

Requirements of Section 194IA

As a buyer, you play a pivotal role in adhering to Section 194IA. Here are the key requirements:

1. TDS deduction: The buyer is responsible for deducting TDS at a rate of 1% of the sale consideration amount. This TDS is to be paid to the government.
   
   
2. TDS payment: TDS should be deducted at the time of payment to the seller. The deducted TDS amount must be deposited with the government using Form 26QB, accessible online through the NSDL portal.
   
   
3. Filing details: You must provide details such as the seller's and buyer's PAN (Permanent Account Number) and specific property information when filing Form 26QB.

How to file TDS on the sale of property under Section 194IA

To file TDS under Section 194IA, follow these steps:

1. Access Form 26QB on the NSDL website.
2. Fill in the required information, including the PAN of the buyer and seller, property details, and TDS amount.
3. Make the TDS payment online through net banking.
4. After successful payment, you will receive a challan with a unique acknowledgement number. Keep this for future reference.

Example of Section 194IA

Imagine you are buying a property for Rs. 80 lakh. According to Section 194IA, you must deduct 1% TDS on the sale consideration:

TDS Amount = Rs. 80,00,000 × 1% = Rs. 80,000

This Rs. 80,000 should be deducted at the time of payment to the seller and subsequently deposited with the government. Additionally, understanding the Income Tax Slab applicable to you can help you better plan your overall tax liability while ensuring compliance with Section 194IA.

In conclusion, understanding Section 194IA is essential when engaging in property transactions. Adhering to the requirements of this provision ensures compliance with tax regulations and helps prevent tax evasion. As a buyer, you play a pivotal role in deducting and remitting TDS, making the property transaction process transparent and legally sound. If you have any doubts or require further information, consider consulting a tax expert or referring to official guidelines provided by the Income Tax Department. Additionally, you can calculate the tax payable using the income tax calculator.

Payment of TDS under Section 194IA

Section 194IA of the Income Tax Act in India pertains to the deduction of Tax Deducted at Source (TDS) on the sale of immovable property, specifically on the consideration paid for the transfer of a property.

Here is an explanation of the payment of TDS under Section 194IA:

1. Applicability:

• Section 194IA is applicable when a person is responsible for paying any sum to a resident seller for the transfer of any immovable property, other than agricultural land.

2. Threshold limit:

• TDS under Section 194IA is applicable when the consideration for the property transfer exceeds Rs. 50 lakh. If the consideration is Rs. 50 lakh or less, TDS is not required to be deducted.

3. Rate of TDS:

• The TDS rate under Section 194IA is 1% of the consideration amount. This amount is deducted by the buyer at the time of making the payment to the seller.

4. Time of deduction:

• TDS under Section 194IA is deducted at the time of credit of the sum to the account of the seller or at the time of payment, whichever is earlier.

5. Deposit of TDS:

• The buyer is responsible for deducting TDS and depositing it with the government. The deposited TDS can be done through the online portal of the Income Tax Department.

6. TAN requirement:

• The buyer is not required to have a Tax Deduction and Collection Account Number (TAN) to deduct TDS under Section 194IA. TDS can be deducted using the PAN of the buyer.

7. Form 26QB:

• After deducting TDS, the buyer needs to file Form 26QB, providing details of the property transaction and TDS deduction. This form is to be submitted online.

8. Issuance of TDS certificate:

• The buyer is required to furnish a TDS certificate (Form 16B) to the seller within 15 days from the due date for filing the statement.

9. Non-applicability to agricultural land:

• It's important to note that TDS under Section 194IA is not applicable to the transfer of agricultural land.

Prerequisites of Section 194 IA TDS

Section 194IA of the Income Tax Act, 1961, pertains to the deduction of TDS (Tax Deducted at Source) on the sale of immovable property. Here are the key prerequisites and details associated with Section 194IA TDS:

1. Applicability: Section 194IA applies to transactions involving the transfer of immovable property, where the consideration for the transfer exceeds fifty lakh rupees.
2. Transaction scope: The section covers various types of transactions, including the sale of land, building, apartment, house, or any other immovable property.
3. Consideration limit: TDS under Section 194IA is applicable when the consideration for the transfer of the property exceeds fifty lakh rupees in a single transaction.
4. Time of deduction: TDS is required to be deducted at the time of credit or payment, whichever is earlier. This means that the diductor needs to deduct TDS when making the payment to the transferor or when the amount is credited, whichever happens first.
5. TDS rate: As of my last knowledge update in January 2022, the applicable TDS rate under Section 194IA is 1% of the consideration amount. However, it's advisable to check for any updates or amendments to the tax rates.
6. PAN of transferee and transferor: Both the transferee (buyer) and transferor (seller) must have a PAN (Permanent Account Number). PAN details of both parties need to be furnished during the TDS deduction process.
7. TDS payment and reporting: The diductor is required to deposit the TDS amount with the government within the stipulated time frame. Additionally, a TDS return (Form 26QB) needs to be filed online, providing details of the transaction and TDS deduction.
8. Exemption for agricultural land: Transactions involving agricultural land are generally exempt from TDS under Section 194IA. However, the exact criteria for land to be considered agricultural may vary.

Penalty of the TDS non-payment

Penalties for Non-Filing of TDS on Sale of Property

Failure to deduct or deposit TDS on property transactions under Section 194IA can lead to penalties, interest charges, and legal consequences for the buyer. The Income Tax Department may impose fines and additional interest for delays or non-compliance.

Implications for Buyers:

• If the buyer fails to deduct TDS, a penalty equal to the TDS amount may be imposed.
• Interest at 1% per month is charged for non-deduction, and 1.5% per month for non-payment after deduction.
• Buyers may face legal action and complications during property registration.

Implications for Sellers:

• The seller may not receive the tax credit for TDS if the buyer fails to deposit it.
• Tax authorities may scrutinize the transaction, leading to further inquiries or penalties.
• Incorrect filing can delay property sale proceedings and affect tax filings.

Ensuring timely TDS deduction and payment is crucial to avoid unnecessary legal and financial burdens.

Category	Relevant URLs
Income Tax Deductions	Section 80CCD(2), Section 80CCD(1B), Section 80CCD1, Section 80CCE, Section 80DD, Section 80DDB, Section 80E, Section 80EEA, Section 80G, Section 80GG, Section 80GGC, Section 80RRB, Section 80TTA, Section 80U
Salary & Allowance Related Sections	Section 16(ia), Section 16(ii), Section 17, Section 17(1), Section 10(13A), Section 89
Property & Capital Gains Tax	Section 24B, Section 54B, Section 54GB, Section 54F, Section 54
TDS & Withholding Tax	Section 194H, Section 194IA, Form 26QB
Income Tax Compliance & Notices	Section 139(9), Section 143(1), Section 148, Section 179, Section 56(2)(x)
SARFAESI Act (Loan Recovery & Security Enforcement)	Section 13, Section 13(2), Section 13(4), Section 14