Section 194IA of the income tax act

As per section 194IA of the income tax act, it is mandatory for a buyer of immovable property (except building or part of building or other than agricultural land) to deduct TDS while paying the seller, if the cost of property exceeds Rs.50 Lakhs. The main purpose of introducing this act in June 2013 is to check the spreading of black money in transactions related to immovable property.

Section 194IA of Income Tax Act: TDS on Property Purchase of Immovable Property

Rate of TDS deduction under section 194IA of the income tax act

Buyer is responsible for deducting and paying 1% of TDS on the sale of property. TDS is applicable on sale of every type of property except building or part of building or agricultural land. There is no need to pay any additional charge or cess over 1% TDS.

Conditions for the applicability of section 194IA of the income tax act

There are certain conditions that you need to follow while paying TDS under section 194IA of the income tax act –

  1. The responsibility of deducting TDS on sale of property lies with the buyer and not the seller.
  2. No TDS is applicable on transactions less than Rs.50 lakhs under section 194IA of the income tax act.
  3. Buyer needs to pay TDS on the whole selling amount and not on just the amount exceeding Rs.50 Lakhs. Suppose you have bought a property worth Rs.70 Lakhs, then the TDS will be calculated on Rs.70 Lakhs and not on Rs.20 lakhs only.
  4. If buyer avails the option of paying through instalments, TDS will be deducted on each and every installment paid by the buyer.
  5. Both buyer & seller PAN number is required to deduct TDS under section 194IA of the income tax act. In case buyers unable to obtain the seller’s PAN, TDS rate will rise to 20%.
  6. Since September 2019, charges attached to the purchased property are also included in the taxable amount. The list of charges to be included under “Consideration for immovable property” are as follows –
  1. Car parking
  2. Club membership
  3. Electricity fees
  4. Maintenance fees
  5. Advance fees

Time of TDS deduction under section 194IA of the income tax act

As per section 194IA of the income tax act, buyer needs to deduct TDS on sale of property, earlier of the following –

  1. At the time of crediting the amount into the transferor account.
  2. Or
  3. When the payment is made via cash, cheque, demand draft or any other payment mode.

Time & mode of payment under section 194IA of the income tax act

As the notification no. 30/2016 issued on 29th April 2016, when a buyer deduct TDS while making payment to the seller, it should be deposited to the government within a time period of 30 days from the end of the month in which the TDS gets deducted. For ex – Suppose the amount of TDS gets deducted in the month of May, then you have 30 days for depositing the amount of TDS to the government i.e. till 30th June. Same procedure should be followed for other months as well. TDS amount paid to the government must be accompanied by form-cum-challan 26QB.

If more than one person is buyer/seller of the property, form 26QB is to be filed separately for each buyer and seller. Form 26QB contains all the transaction details between buyer and seller and is mainly used for furnishing TDS on property at the time of payment. Form 26QB can easily be submitted online or visiting any bank branch.

Procedure for paying TDS under section 194IA of the income tax act

The procedure for paying TDS under section 194IA of the income tax act is as follows –

  1. All the transaction details between the buyer & seller is furnished in form 26QB and TDS is paid to the government within 30 days of the last day of the month in which the deduction was made.
  2. It can be paid online or by manually visiting the bank branch.
  3. After TDS payment, Form 16B is given to the buyer which he needs to submit to the seller.
  4. Form 16B can easily be generated and downloaded from the TRACES portal.

Penalties for Non-deduction/deposit of TDS on property

The penalties for non-deduction/deposit of TDS on property -

  1. Interest on delayed TDS deposit on property – If buyer does not deduct the TDS, he she needs to pay 1% interest per month on the non-deducted amount. In case buyer deducts the TDS but does not pay the same to the government, 1.5% interest of the non-deducted amount will be applicable on the buyer every month.
  2. Penalty for delay in depositing TDS on property – Delay in depositing TDS on property will attract a penalty up to Rs.1 Lakh.
  3. Penalty for delay in filing of form 26QB – Delay in filing of form 26QB will attract a penalty of Rs.200 per day. However, penalty should not exceed the TDS amount.

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