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2018

Section 194IA : TDS on purchase of immovable property

SECTION 194IA TDS ON PURCHASE OF IMMOVABLE PROPERTY

If you are planning to buy an immovable property (other than rural agricultural land), you must be aware of the provisions related to TDS on purchase of immovable property. As per Section 194IA of Income Tax Act, where value of an immovable property being purchased is Rs. 50 lakh or more, the buyer is liable to deduct TDS @ 1% from the payment made to the seller. This provision was introduced in Finance Act, 2013.

Section 194IA - TDS on Payment for transfer of certain immovable property other than agricultural land:

  • Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.
  • No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.
  • The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.


Explanation.—For the purposes of this section,—

a. “agricultural land” means agricultural land in India, not being a land situated in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;
b. “immovable property” means any land (other than agricultural land) or any building or part of a building.

Liability of the Purchaser:

The purchase assumes following liabilities under this section:

Liability to deduct TDS on transfer value of the property:

  • Deduct tax @1% from the payment made to the seller.
  • Collect the Permanent Account Number (PAN) of the seller and verify the same with the Original PAN card.


File up Form 26QB online:

  • It is mandatory to furnish the PAN of seller as well as the purchaser while providing the information regarding the sale transaction in the online from (From No.26QB).
  • Please insure that there is no error in quoting the PAN or other details in filling online form 26QB.
  • Form 26QB can be filed online at www.tin.nsdl.com.


Deposit the tax deducted at source to the credit of the Government:

  • The deductor must deposit the amount of TDS to the credit of Government along with filing of Form 26QB.
  • If TDS is not deposited to the Government along with 26QB, it must be deposited within 7 days of online filing.
  • If a deductor fails to deposit TDS amount within 7 days, Form 26QB shall be treated as invalid. In such cases, 26QB must be filed again.


TDS Certificate:

  • The deductor must issue a TDS Certificate called Form 16B to the seller.
  • TDS certificate can be Downloaded from TRACES(www.tdscpc.gov.in).
  • TDS Certificate must be issued within 15 days from deposit of TDS.


Responsibility of the Seller of the Immovable Property

  • Provide your PAN to the Purchaser for furnishing information regarding TDS to the Income Tax Department.
  • Verify deposit of taxes deducted by the Purchaser in your Form 26AS Annual Tax Statement.


No requirement of TAN:

In all other cases, a deductor of TDS must have a valid TAN. However, the deductor of TDS u/s 194IA does require to have TAN. Only PAN is sufficient.

Applicability:

  • All persons buying immovable property from a resident Indian have to deduct the tax.
  • This applies on purchase of all kinds of real estate such as Land, Building, Land along with Building/flat.
  • It applies to property bought in a resale and also on purchases from builders. The only exception is if you are buying agricultural land.
  • The seller needs to be a resident of India, and could be either individual, partnership, company or other person mentioned in tax laws.
  • If you are buying immovable property from a non-resident seller, the tax deduction rules are different.
  • Payment to non- resident sellers would continue to be governed under provisions of section 195 of the Income- tax 1961 as before.

 

When should the tax be deducted?

  • If you maintain books of accounts, the tax should be deducted at the time of paying the seller or crediting his account, whichever is earlier.
  • If you do not maintain books of accounts (most individual buyers would come in this category) you need to deduct the tax at the time of paying the seller.

 

Payment in Instalment:

In case where payment is made in instalment, TDS must be deducted proportionally at the time of payment of each instalment.

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