Tax Deducted Source(TDS) is a concept of collecting taxes at the very source of income. As per this concept, tax shall be deducted by the person making the payment (purchaser)for purchase of property from the resident transferor on any money or consideration paid and remit the same to the Central government. Section 194IA deals with TDS on purchase or transfer of certain immovable property which shall be discussed in this article.
The finance bill, 2013 introduced Section-194IA in the income tax act, 1961, in order to have a reporting mechanism of transactions in the real estate sector and also to collect taxes at the earliest point of time.
With an intention to reduce the compliance burden on the small taxpayers, Tax shall not be deducted for the transactions less than 50 Lakhs.
The requirement to deduct TDS on Property Purchase
TDS shall be deducted on the transfer of certain immovable property such as land (Other than agriculture land), any building or any part of building, where such consideration is Rs.50 lakh or more.
In the following cases, Tds shall not be deducted under section 194IA
- Transfer of Immovable property as rural agriculture land
- Immovable property which is acquired by way of compulsory acquisition under any law for the time being in force
- In cases where consideration paid for the transfer of immovable property is less than Rs.50 lakh.
Rate of TDS on Purchase of Property :
TDS shall be deducted at the rate of one percent(1%) of such sum or consideration.
w.e.f. 01/09/2019, Tds shall be deducted at the rate of one percent (1%) on all payments in the nature of club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charges of similar nature, which are incidental to the transfer of immovable property.
Note: TDS shall be deducted at the rate of 20% if such a person is failed to furnish the PAN.
When TDS shall be deducted on Purchase of Property:
TDS shall be deducted at the earlier of the below
- At the time of credit of such sum or amount or consideration to the account of the transferor.
- At the time of payment of such sum or amount or consideration in cash or by the issue of a cheque/draft or by any other mode.
Deposit of Tds to the central government
TDS deducted on purchase of property u/s 194IA shall be deposited to the credit of Central Government by remitting it electronically to Reserve Bank of India (RBI) or State Bank of India (SBI) or to any authorized bank, within the period of 30days from the month of deduction.
The Payment should be accompanied by challan cum statement in form no.26QB.
The person who deducted TDS on purchase of property u/s194IA is liable to furnish the TDS certificate in form no.16QB to the seller within a period of 15 days from the due date of furnishing challan cum statement in form.26QB.
Definitions under section 194IA
Immovable Property means any building or any part of building or any land other than agriculture land.
Agriculture land means any land excluding the land prescribed under section 2(14)(iii)(a)&(b).
Agriculture land means the land which is not situated under the following area
- Within the jurisdiction of Municipality or Cantonment Board having population < 10,000.
- Within any area the distance measured aerially as prescribed below
|Municipality Population||Distance as measured from Municipality or Cantonment Board|
|Population > 10,000 but < 1,00,000||Within 2 kms|
|Population > 100,000 but < 10,00,000||Within 6 kms|
|Population < 10,00,000||Within 8 kms|