Section 194IA Guide

Section 194IA of the Income Tax Act, 1961, has a pivotal role in the property transactions. It revolves around Tax Deducted at Source (TDS) on the sale of immovable property in India. Read on to understand explore Section 194IA, its requirements, how to file TDS, and provide a practical example to help you navigate this important tax provision.

What is Section 194IA?

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.

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.

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

The penalty for non-payment of TDS (Tax Deducted at Source) can vary based on the delay in depositing the deducted tax amount.

1. Interest penalty: If the TDS amount is not deposited on time, interest is levied under Section 201(1A) of the Income Tax Act. The interest is calculated from the date on which TDS was supposed to be deposited until the actual date of deposit.
2. Late filing fees for TDS returns: Apart from interest on late deposit, there are penalties for the late filing of TDS returns. The late filing fees can be imposed under Section 234E of the Income Tax Act. This penalty is separate from the interest on late deposit and is applicable for each day of delay until the return is filed.
3. Prosecution for non-compliance: In severe cases of non-compliance, the Income Tax Department has the authority to initiate legal proceedings. This may include the prosecution of the person responsible for deducting and depositing TDS.