Mr P Chidambaram introduced a provision through section 194IA of the Income Tax Act on 1st June 2013, mandating a 1% TDS deduction on the sale of property to a resident Indian. The scope of this provision encompasses various types of immovable property, such as residential properties, commercial properties, plots, and unconstructed land, excluding agricultural land. Notably, TDS is only required for transactions where the sale proceeds amount to Rs. 50,00,000 (Fifty Lakhs) or more, providing some relief to citizens.
What Does Section 194IA Mean?
Section 194IA is a provision within the Income Tax Act that pertains to Tax Deducted at Source (TDS) payments. It was introduced through the Finance Act of 2013 to impose TDS on the consideration received for the transfer of immovable properties by resident individuals. If the value of the property exceeds Rs. 50 lakhs, the buyer must deduct and remit 1% of the transaction amount as TDS under Section 194IA of the Income Tax Act.
When is TDS Deducted U/S of 194IA?
Under this section, any person (buyer or transferee) who agrees with a resident individual to transfer immovable property (excluding agricultural land) comes under the criteria to deduct TDS.
What is the Rate and Amount of TDS on Property Sales?
The TDS rate for such transactions is 1%. The deduction should be made at the earlier of the following events:
- Income Crediting to the account of the payee or receiver
- Actual payment made in cash, cheque, draft, or any other mode
This implies that the seller will receive the net amount only. For example, Mr A sells a property to Mr B for Rs. 60,00,000. In this case, Section 194IA will be applicable as follows:
| Attributes | Payment |
| Property Sale Value | INR 60,00,000 |
| TDS by B U/S 194IA (@ 1% of INR 60,00,000) | INR 60,000 |
| Net Amount Payable to Mr. A | INR 59,40,000 |
Important Points Regarding TDS Under Section 194IA
- TDS must be deducted and paid to the government by buyers for properties valued over Rs 50 lakhs.
- The responsibility of deducting and remitting TDS lies with the buyer, not the seller.
- Buyers will be accountable to the authorities in case of any misappropriation. Buyers need to complete Form 26QB to credit the TDS.
- Buyers should do so separately for each participant if multiple buyers or sellers are involved.
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Consequences of Non-payment of TDS Section 194IA
Mr. B has deducted Rs. 60,000 as TDS, which needs to be deposited to the government within 7 days of the following month using challan Form 26QB (TDS on Property).
TDS Challan Form 26QB and Time Limit to Deducted TDS By Government
The amount of Rs. 60,000 deducted as TDS by Mr B should be deposited to the government within 7 days of the following month through challan Form 26QB (TDS on Property).
How to Make Payment of TDS or Create Form 26QB?
- To generate Form 26QB or make an online payment, visit the website link provided (https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp)
- Scroll down and select the last option on the left.
- A screen displaying the image given below will appear. Fill in the required details related to taxpayer info, address, property details, and payment info.
- Some details on the home page, such as financial year, assessment year, name & and status of the transferee, and name & status of the transferor, will be auto-filled.
Where Can the Seller View the TDS Deducted on Property?
The TDS deducted from the property can be seen by the seller in Form 26AS Part F.
What are the Requirements for Deducting TDS Section 194IA?
Before deducting TDS under section 194IA, consider the following points:
- No TDS should be deducted if the total payment amount is less than Rs. 50 lakhs.
- Having a Tax Deduction and Collection Account Number (TAN) is not mandatory for deducting TDS under section 194IA.
- If section 194LA (TDS on Payment of Compensation on Acquisition of Certain Immovable Property) applies, the provisions of section 194IA will not apply.
How Much TDS Amount is Deducted on Property Sale U/S of 194IA?
TDS under Section 194IA is deducted on the transaction value of the property and not on the value that includes applicable taxes. For example, if a property is sold for Rs. 60,00,000 and the applicable GST is Rs. 6,00,000, the TDS under section 194IA will be deducted on Rs. 60,00,000 and not on Rs. 66,00,000.
The purpose of implementing the TDS rule for real estate transactions is to monitor sale and purchase transactions in the real estate market.
This market involves transactions that are often conducted partly in cash and partly through banking channels, making it highly speculative. For electronic filing of TDS returns, Gen TDS is the comprehensive software in India that is designed especially for tax professionals. The software has many features including sections 194P, 194A and 194Q.
TDS Form 16B
In this case, the buyer Mr. B must provide a Certificate of TDS deducted (Form 16B) to the seller Mr. A. To generate Form 16B, follow these steps:
- Log in to the TRACES website (https://www.tdscpc.gov.in/app/login.xhtml).
- Go to the Downloads section.
- Select Form 16B from the list.
- Enter the required details and click on “Go”.
Frequently Asked Questions of Section 194-IA
Q1. How can I make a TDS payment under section 194IA?
- The payment should be made by submitting Form 26QC, which can be done online or offline through an authorized bank.
- It is crucial to note that collect Form 16C and submit it to the landlord.
Q2. What is the TDS rate on the sale of a property?
The TDS rate is 1% as per Section 194IA of the Income Tax Act, 1961, applicable to all transactions from June 1, 2013 onwards.
Q3. How to claim TDS u/s 194IA?
The buyer must present the TDS challan to the seller in Form 16B. The TDS certificate can be downloaded from the TRACES website. The seller can claim the TDS credit if the property transaction is not used for capital gains. The TDS amount is included in Forms 16B and 26AS.
Q4. What is the time duration for paying TDS on a property?
TDS payment for property transfers should be made within 30 days. For immovable property, the TDS must be paid within 30 days from the end of the month in which the deduction is processed.
Q5. Is a TAN required to deduct TDS under section 194IA?
No, there is no compulsory requirement to have a TAN for deducting TDS under section 194IA.
Q6. What is the Procedure to download Form 16B?
- Register and log in on the TRACES portal (www.tdscpc.gov.in) using your PAN.
- Under the Downloads menu, select Form 16B (For Buyer).
- Fill in the details of the property transaction for which Form 16B is to be obtained. The details include the Assessment Year, Acknowledgment Number, and PAN of the Seller. Click on Proceed.
- The confirmation screen will appear, click on Submit Request.
- After you submit a download request, a message indicating its successful submission will be displayed on the screen. Remember to jot down the request number so you can easily search for it when you want to locate the download request at a later time.
- The requested files can be downloaded from the Requested Downloads section by searching for the request number and clicking on the HTTP download button.
Q7. Is it allowed to pay 1% TDS under section 194IA for buying a property from an NRI?
No, Section 194IA requires that the transferor should be a resident for TDS deduction.
Q.8 If I buy two properties from the same seller with a two-month gap, each valued at 32 lakhs, do I still need to pay as per Section 194IA?
No, since there are two separate properties each having a value below 50 lakhs, TDS is not applicable.
Q9. What does the reflection refer to in section 194IA?
Consideration refers to the actual amount paid for the property and not the stamp duty value.
Q10. When paying 1% TDS on the property as per Section 194IA cover merely the basic price of the property?
No, as per this section, if the payment of the sale is more than 50 lakhs, the buyer needs to deduct 1% TDS. The seller does not have the accountability to deduct TDS. Looking at it from the buyer’s point of view, the Goods and Services Tax (GST) can be seen as an extra tax that is not included in the sale amount.
Q11. Is Section 194IA appropriate for a JDA?
Yes, there is no separate rule for a JDA Agreement. Section 194IA applies to JDA agreements also.
Q12. Can we claim a refund of TDS paid under Section 194IA if the deal is later cancelled? Which form should be filed for a refund, and is it done online or manually?
Yes, a refund of TDS can be claimed on the cancellation of a deal. The procedure is done through online mode to claim a refund.
Q13. Can an income person claim TDS u/s 194IA while filing an ITR?
Yes, if there is a sale of an immovable property, a salaried person may also have capital gains in this case.
Q14. Can we avail the advantages of Section 194IA in case of acquiring property by four different people in a single registry for a consideration of Rs. 60 lakhs?
Yes, since the payment of the sale exceeds 50 lakhs, Section 194IA is applicable.
