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Section 194IA: TDS on sale of Property

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Hiral Vakil

TDS
TDS Sections
Last updated on June 21st, 2021

What is Section 194IA?

As per section 194IA, any transaction on or after 1st June 2013, where any buyer buys an immovable property (other than agricultural land) costing INR 50 lakhs or more, then he needs to deduct tax at a rate 1% on the purchase price.

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It shall also be noted that if the payment of consideration is via instalments the TDS shall be deducted on payment of each instalment. The same applies to the payment of advance in case of purchase of immovable property (other than agricultural land). The amount to the seller shall be paid net of TDS

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

Example of TDS on sale of Property u/s 194IA

Mr Parth purchases an immovable property from Mr Suraj for INR 70 lakhs and the payment of consideration is made in the following manner:

Date of payment Nature of Payment TDS Rate
1/1/2017 Advance 10 Lacs
1/2/2017 First Installment 30 Lacs
1/3/2017 Second Installment 30 Lacs

In the current scenario the TDS u/s 194IA shall be deducted at 1% in each case of payment whether it is by way of advance or an instalment.

For an instance the amount paid as advance on 1/1/2017, the tax of INR 10,000 shall be deducted and net payment of INR 9,90,000 shall be made to the seller.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

How to deduct TDS on sale of Property u/s 194IA?

How to deduct TDS u/s 194IA, in case of more than one buyer or seller?

In case of More than one buyer:

In a transaction of sale of immovable property if there are more than 1 buyer and the individual amount of consideration is less than INR 50 lakhs for each buyer but the aggregate amount of consideration exceeds INR 50 lakhs the transaction shall fall within the ambit of 194IA also each buyer needs to deduct the tax on the amount paid.

Example

Mr A and Mr B buy a land in partnership each contributing an amount of INR 45 lakhs.

In the current case though the individual amount paid by both the buyers Mr A and also Mr B is less than INR 50 lakhs, but as the aggregate consideration paid for the land exceeds INR 50 lakhs ( i.e. 90 lakhs). The transaction shall be considered as sale of immovable property u/s 194IA, and tax shall be deducted by both the buyers individually.

In case of More than one seller

Similarly in case of sale of immovable property, where a transaction with more than one seller and the aggregate value of transaction of sellers exceeds INR 50 lakhs the transaction shall be included within the ambit of section 194IA and the buyer needs to deduct the tax.

Example

Mr X and Mr Y decide to sell the land co-owned by both of them for a consideration of INR 60 lakhs to Mr C. Also, It was decided that the consideration shall be divided on an equal basis between both the sellers.

In the current scenario, though the individual consideration received by each seller (i.e INR 30 lakhs) is less than the exemption limit of INR 50 lakhs, as the aggregate consideration received (i.e INR 60 lakhs) exceeds the limit; the transaction shall be included within the ambit of 194IA.

In case of more than 1 buyer and seller form 26QB needs to be filed separately in case of each buyer and seller.

FAQs

On which amount TDS is deducted under section 194IA?

TDS needs to be deducted on the total amount paid to the seller of property excluding VAT and Service Tax. Hence TDS is deducted on Transaction Value of Property.

What is the proof of TDS deducted on sale of property?

After buyer deposits TDS, he is required to issue a certificate in Form 16B to the seller of property. Form 16B can be downloaded from CPC-TDS after 15 days from the end of the month in which the payment has been made. The seller of a property can also check his tax credit statement i.e; From 26AS for TDS deducted by buyer.

Is it mandatory to have the PAN of the seller?

PAN of the seller is mandatory. The same may be acquired from the Seller before effecting the transaction.

Got Questions? Ask Away!

  1. Hey @Dia_malhotra

    As per section 194A, TDS on interest other than interest on securities is required to be deducted by any person other than Individual or HUF at the rate of 10%, when paid to a resident. No surcharge, education cess or SHEC shall be added to the above rate.

    Hope this helps!

  2. Hey @HarishMehta

    TDS u/s 194J needs to be deducted by deductor other than an individual or a HUF, @ 10% on any amount paid or payable to any which is in excess of INR 30,000 as:

    1. Fees for professional services
    2. Fees for technical services
    3. Any remuneration or fees or commission by whatever name called paid to a director ( other than salary)
    4. Royalty
    5. Any sum referred to in clause (VA) of section 28.

    Hope this helps!

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