TDS on Property Sale in India – Section 194IA

Mr. P Chidambaram has introduced section 194IA in the budget 2013-2014. With the introduction of section 194IA, TDS at the rate of 1% is to be deducted on sale of property transactions by the buyer while paying consideration money to seller. Section 194IA is applicable with effect from 1^st of June 2013.

Section 194IA states that, TDS at the rate of 1% is to be deducted from sale of immovable properties where the consideration paid or payable is more than Rs. 50, 00,000. However this provision will not be applicable if the property sold is an agricultural land.

According to the provisions of section 194IA, it is the responsibility of the buyer (not seller) to deduct tax at the rate of 1% and make payment of balance amount to the seller or transferor. If the buyer is making payments in installments then TDS under section 194IA has to be deducted while making payment of each installment to the seller.

In advance payments also you are required to deduct TDS under section 194IA at the time of making such advance payment. However Section 194IA will be not applicable if total value of the property that has been sold is less than Rs. 50, 00,000.

Rate of TDS under section 194IA

If seller provides a valid permanent account number then tax has to be deducted u/s 194IA at the rate of 1% on the total consideration paid or payable to the transferor or seller.

In case seller or transferor does not have a valid PAN then TDS has to be deducted at the rate of 20% on the total consideration paid or payable.

Buyer or purchaser is not required to have a TAN that is generally needed for deduction of tax and depositing with the IT department. For the purpose of section 194IA, the buyer can deduct TDS and deposit it with the help of his own PAN and PAN of the seller.

TDS deposit

After such deduction from payments or installments, buyer is required to deposit the deducted amount with IT department on or before 7 days from the end of the month on which such payment is made. That means if you buy a flat on December month then you need to deposit the deducted TDS amount on or before 7^th January.

Buyer is required to pay such deducted amount online by using form 26QB. After such deposit buyer will be issuing form 16B to the seller or transformer within 15 days from the date of such deposit. Form 16B has to be downloaded from the trace portal of government of India.

Joint Owner

Section 194IA is applicable to the consideration amount that you receive on sale of property. It does not matter whether you are the only owner of the property or jointly it’s owned. For example, if you are selling a family inherited property which is in the name of two or more brothers and its value is in excess of Rs.50, 00,000 then section 194IA will be applicable as the sale consideration is in excess of the limit.

Penalty for Non compliance

In case of non compliance to section 194IA, interest and penalty will be imposed on the purchaser.

For failure to deduct tax or short deduction of tax, interest at the rate of 1% per month or part of the month will be charged from the date of deductible till the date the same is deducted.

For failure in depositing the deducted tax amount, interest at the rate of 1.5% per month or part of the month from the date of deduction till the date of actual payment to IT department.

Other relevant points for Section 194IA

• Buyer need to collect the PAN of seller or transferor and validate it with the original PAN card.
• Section 194IA is applicable to all kinds of property such as land, building, flat, land along with building. However it’s not applicable to sale of agricultural land.
• TDS deducted under section 194IA has to be deposited electronically or online.
• TDS under section 194IA will not be applicable if your sale agreement is made before 1^st of June, 2013. It will also not be applicable if you are receiving consideration after 1^st June, 2013 for a sale agreement that has been made before 1^st June, 2013.
• If your sale consideration is less than Rs.50, 00,000 then section 194IA will not be applicable irrespective of the date when you made this sale.
• Section 194IA will not be applicable if you are not getting any consideration for the transfer amount.

Section 194IA is applicable if you are selling the property to a person who is resident of India. If the seller or transferor is a non-resident then section 195 will be applicable.