TDS Under Section 194 IA

Section-194IA Payment on transfer of certain immovable property other than agricultural land.

This article discusses the provisions of section 194IA as per Income tax act,1961 and throws light on scope and limitations of section 194IA.

TDS under 194 IA

TDS

Tax Deducted Source (TDS) is a concept introduced with an intention to collect taxes at the very source of income. As per this concept, tax shall be deducted by the deductor (person who makes a payment) at the time of making payment of specified nature to any other person (deductee) and remit the same to the Central government. The deductee can get the same as a credit of the amount so deducted on the basis of form.26as (annual consolidated credit statement) or TDS Certificate.

Background of section-194IA

SEC-194IA was introduced in the income tax act, 1961, by way of an amendment in the finance bill, 2013 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. In order to reduce the compliance burden on the small taxpayers, no tax shall be deducted in respect of the transactions less than 50 Lakhs. 

Provision of Section 194IA 

Any person, being a transferee (i.e., the person who receives the property) responsible for paying ( other than the person referred to in section 194LA i.e., the person responsible for paying on account of compulsory acquisition under any law for the time being in force as referred in 194LA section) to a resident transferor (i.e.., the resident person who transfers the property) any sum by way of consideration for transfer of immovable property (other than agriculture land), shall at the time of credit of such sum to the account of the transferor or at the time of payment of such amount in cash or by issue of a cheque/draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent (1%) of such sum as income-tax thereon.

A deduction shall be made only when the consideration for the transfer of Immovable Property is greater than or equal to 50 lakhs.

Section 203A (Tax Deduction and Collection Account Number) provisions of Income Tax act, 1961, shall not apply to the person responsible to deduct tax under section 194IA.

Section 194IA in Brief

Immovable Property :

Immovable Property means any land ( other than agriculture land) or any building or any part of building

Agriculture Land :

Agriculture land means any land other than the land referred under section 2(14)(iii)(a)&(b).

Agriculture land means the land which was not situated

  • Within the jurisdiction of Municipality or Cantonment Board having a population not less than 10,000.
  • Within any area, the distance measured aerially as provided below
Municipality Population Distance from Municipality or Cantonment Board
Population > 10,000 but < 1,00,000 Within 2 km
Population > 100,000 but < 10,00,000 Within 6 km
Population < 10,00,000 Within 8 km

Payer:

The payer is the person (called as transferee) who purchases any immovable property other than agriculture land for any sum of consideration from a resident transferor.

Note: payer must be the person other than the person referred to in section 194LA.

Payee:

The payee is the resident person (called as transferor) who transfers or sells any immovable property other than agriculture land.

Scope & Applicability:

Section 194IA applies only when the below conditions have been satisfied:

  • The payer must be any person as mentioned above.
  • The payee must be a resident transferor of any immovable property other than agriculture land.
  • The immovable property must and should be transferred for consideration.
  • Such Consideration should exceed 50Lakhs.

When Tax should be deducted :

Whichever is earlier of below

At the time of credit of such sum/amount/consideration to the account of the transferor.

or

At the time of payment of such sum/amount/consideration in cash or by the issue of a cheque/draft or by any other mode.

Rate of Tax :

The tax shall be deducted at the rate of one percent(1%) of such sum or consideration.w.e.f. 1st September 2019, Tds of one percent (1%) should be deducted 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.

Furnishing PAN :

The person on whom the tax should be deducted at source u/s 194IA should submit the PAN to the deductor.

If Pan not Furnished :

If such person fails to submit the PAN tax shall be deducted at the higher of the following rates-

  • Prescribed rates in the act
  • Rate which is mentioned in the finance act
  • 20%  rate

TDS under 194 IA

Deposit of Tds  to the central government :

Tax deducted u/s 194IA shall be deposited to the credit of CG by remitting it electronically to RBI or SBI or to any authorized bank,  within 30days from the month of deduction. It should be accompanied by challan cum statement in form no.26QB.

Form 16B :

The person who deducted tax u/s194IA is liable to furnish the certificate in form no.16QB within 15 days from the due date of furnishing challan cum statement in form.26QB.

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