In the Finance Act 2013 a new section was introduced i.e 194IA of the Income Tax Act. This section was introduced to cover the transaction of purchase of the immovable property. In this, the buyer is required to deduct tax while making payment of immovable property if the amount exceeds the specified limit.
What is Section 194IA?
When any person buys an immovable property (other than agricultural land) costing INR 50 lakhs or more then TDS is to be deducted at 1% of the purchase price under section 194IA. The following points are also be considered:
- The buyer and seller should be residents of India for the purpose of deduction of TDS under section 194IA.
- The tax shall be deducted on the entire purchase consideration and not only on the amount exceeding INR 50 lakhs.
Example: Ram has bought land for INR 60 lakhs from Shyam. Since the value of consideration is more than INR 50 Lakhs, Ram must deduct TDS on the entire amount (INR 60 lakhs) and not on exceeding amount (INR 10 lakhs).
When to deduct TDS u/s 194IA?
The tax shall be deducted on the payment of the consideration to the seller. The date of payment shall be earlier of:
- The credit of purchase amount to the seller’s account or
- At the time of actual payment by cash, cheque, draft, or by any other mode.
Also, If the payment of consideration is via installments then the TDS shall be deducted on payment of each installment. The same applies to the advance payment in case of the purchase of immovable property (other than agricultural land). The amount to the seller shall be paid after the deduction of TDS.
Let’s understand with an Example:
Parth purchases an immovable property from Suraj for INR 70 lakhs. The payment of consideration is made in the following manner:
| Date of Payment | Nature of Payment | Amount |
| 01/01/2022 | Advance | 10 Lakhs |
| 01/02/2022 | First Installment | 30 Lakhs |
| 01/03/2022 | Second Installment | 30 Lakhs |
In this case, the TDS u/s 194IA shall be deducted at 1% in each case of payment whether it is by way of advance or an installment.
For an instance, the amount paid as an advance on 01/01/2022, the tax of INR 10,000 shall be deducted and a net payment of INR 9,90,000 shall be made to the seller.
How to deduct TDS on the transfer of Property u/s 194IA?
- In the case of the sale of immovable property (other than agricultural land), the buyer need not obtain a TAN in order to deduct the TDS. The buyer can deduct TDS using their PAN.
- Once the TDS is deducted it shall be paid to the Government within a period of 30 days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form 26QB.
- After filing Form 26QB, the buyer needs to issue the TDS certificate to the seller. The buyer can download the certificate from the TRACES website.
- The PAN of both buyer and the seller is mandatory to be provided. In the case the seller does not have a PAN then TDS shall be deducted at a higher rate of 20%.
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 and also each buyer needs to deduct the tax on the amount paid.
Example
Mr. A and Mr. B buy 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 Mr. B is less than INR 50 lakhs, but the aggregate consideration paid for the land exceeds INR 50 lakhs ( i.e. 90 lakhs). The transaction should be considered as the sale of immovable property u/s 194IA, and tax shall be deducted by both buyers individually.
In case of More than one seller
Similarly in the case of the sale of immovable property, where a transaction with more than one seller and the aggregate value of the 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
Swapnil and Tarun decided to sell the land co-owned by both of them for a consideration of INR 60 lakhs to Akash. Also, It was decided that the consideration shall be divided on an equal basis between both 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, but the aggregate consideration received (i.e INR 60 lakhs) exceeds the limit; thus 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 for both buyer and seller.
FAQs
TDS needs to be deducted from the total amount paid to the seller of the property excluding GST. Hence TDS is deducted from the transaction value of the property.
After the buyer deposits TDS, they are required to issue a certificate in Form 16B to the seller of the 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; Form 26AS for TDS deducted by the buyer.
PAN of the seller is mandatory. The same may be acquired from the Seller before effecting the transaction.
No, If the seller of the property is Non-resident then TDS will be deducted as per section 195 and not as per section 194IA.
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!
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:
Hope this helps!
Hello @the_AK,
Against gross income, you can claim business expenses that you have incurred for earning that income. So you can claim this service fee as a business expense from the gross income received by you.
Hope this helps!
Hey @Bharti_Vasvani can you please help here?
Hello @Anuj_Agarwal,
TDS will be deducted by the company when the interest is actually paid on the securities, so at that time whoever is the owner of such security shall receive the interest and can claim credit of interest.
Hope this helps!
Hey @Anuj_Agarwal,
You can check out this article for more clarity:
Hope this helps!
I have respectable salary income and 1000 insurance commission…ie old commission…not claiming any expenses…can i show it as other income in itr1 or have to file itr 3
Hi @Shivam_B
If you have income from salary and income from insurance commission (business income), then you will be required to file ITR 3.
Itr 3 is so big…have to pay heavy charges…for filing…will it be defective if i do so ie reporting 1000 as other income in itr1 along with salary income…have closed down the insirance work since yesrs…i even contacted commssiom giving broker and closed my commission account…still they are showing in 26as wheress i am not receiving in real
Hi @Shivam_B
As per the recent utilities, ITD gives you the option to select only the schedules applicable to you while filing ITR.
Thus, you are not required to go through the entire ITR 3 form. You can also prepare and file ITR on Quicko, where you can upload form 16 and add commission income under the head “Business & Profession” and file ITR 3, without any charges as Quicko is a DIY platform helping individuals to file taxes.