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From 1st June 2013 through section 194IA of Income Tax Act a provision was rolled out by Mr. P Chidambaram to deduct 1% TDS on sale of the property to a resident Indian. The property here includes every immovable property like : House Property | Commercial Property | Plot or unconstructed land And all such other properties except agricultural land. To the relief of citizens, TDS needs to be done only on the transactions where sale proceeds are of Rs. 50,00,000 (Fifty Lakhs) or more.
Section 194 of the Income Tax Act includes various clauses related the Tax Deducted at Source (TDS) payments. Finance Act, 2013 inserted a new section 194-IA to introduce TDS on consideration on transfer of immovable properties by a resident transferor. If the property is worth more than Rs 50 lakhs, a buyer is required to deduct and pay 1% of the transaction cost as TDS under Section 194-IA of the Income-Tax Act.
Any person (Buyer or Transferee) who enters into an agreement with a resident for transfer of immovable property (land or building or both but not agricultural land) is required to deduct TDS under this section.
The rate of the tax deduction is 1%. And the time of deducting tax is earlier of
Which means,in these cases the seller shall be entitled to receive only the net amount.
Let us consider an example, say the property is sold by Mr A to Mr B for Rs. 60,00,000. Now, Section 194IA shall apply as under
| Particulars | Amount |
|---|---|
| Sale Value of Property | Rs. 60,00,000 |
| Less: Tax Deducted at Source by B u/s 194IA (@ 1% of Rs. 60,00,000) | Rs. 60,000 |
| Net Amount Payable to Mr A | Rs. 59,40,000 |
The amount of Rs. 60,000 (Sixty Thousand) deducted as TDS by Mr.B shall be deposited to the government within 7days of next month in challan Form 26QB (TDS on Property).
The amount of Rs. 60,000 (Sixty Thousand) deducted as TDS by Mr.B shall be deposited to the government within 7days of next month in challan Form 26QB (TDS on Property).
To generate Form 26QB or make an online payment follow this process
TDS so deducted will reflect in Form 26AS Part F, as shown in the image below
Before making provision of TDS u/s 194IA the following pointers shall be duly looked into
No TDS shall be deducted if the total amount of consideration is less than Rs.50 Lakhs.
TAN is not mandatory to deduct TDS under section 194IA
If Section 194LA (i.e TDS on Payment of Compensation on Acquisition of Certain Immovable Property) is applicable then provisions of Section 194IA will not be applicable.
TDS under Section 194IA needs to be deducted on transaction value and not on value inclusive of applicable taxes. Say, the property is sold at Rs. 60,00,000 and GST applicable on it is Rs. 6,00,000. In this case the TDS u/s 194IA would be deducted on Rs. 60,00,000 and not on Rs. 66,00,000.
TDS rule was brought to effect so as to keep a track of transactions of sale and purchase in real estate. As it is a highly speculative market where transactions are done a party in cash and partly through baking channels.
To know more about TDS on sale of the property to NRI and all FAQ’s on TDS on sale of property read our series of blogs.
The Buyer Mr. B in our case shall also give Certificate of TDS so Deducted in Form 16B to the seller Mr. A. To generate Form 16B certificate follow these steps
This payment should be made through Form 26QC. Now there are two important things to remember:
1%. As per Sec 194 IA of the Income Tax Act, 1961, all transactions with effect from June 1, 2013, should be taxed @ 1%.
In form 16B, the buyer must present the TDS challan to the seller. On the TRACES website, the TDS certificate is available for download. The credit of the TDS can be claimed by the seller if the property transaction is not used for capital gains. Forms 16B and 26AS include the TDS amount.
The time limit to pay TDS on a property is 30 days. TDS on immovable property transfers must be paid within 30 days after the end of the month in which the deduction is made.
Having a TAN is not mandatory for deducting TDS under section 194IA
No, the transferor should be resident for TDS deduction under this section.
No, as there are two different properties and each has a value below 50 lakhs.
Actual Consideration not stamp Duty Value.
No, This Section Clearly points out that if the sale consideration exceeds 50 lakhs, buyer has to deduct 1% TDS and the seller need not to worry about deducting TDS and from the point of view of buyer GST can be considered as an additional tax and it does not form part of sale consideration.
Yes, there is no difference in a JDA Agreement. So 194-IA will apply on JDA agreement as well.
Yes, we can take TDS refund on cancellation of deal There is an online procedure for Refund.
YES, there will be a sale of Immovable Property, Salaried person will also have a Capital gain in this case.
Yes, as the sale consideration is more than 50 lakhs 194-IA is applicable.
