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Section 194 of the Income Tax Act of India, 1961 deals with various clauses about the Tax Deducted at Source, TDS payments. Under Section 194, there are two sub sections that are of utmost relevance, Section 194IA and Section 194IB. In this article, let’s understand Section 194IA of Income Tax Act, 1961.
As per Section 194IA of Income Tax Act, 1961, any buyer of an immovable property (other than agricultural land) shall be liable to deduct TDS at 1% while making the payment to the owner or seller of the property. This section was made applicable from June 1, 2013. Let’s have a look at who is required to deduct TDS under Section 194IA.
Any person, be it a buyer or transferee, who enters into an agreement with a resident for the transfer of immovable property, it can be land or building or both (except agricultural land), will be required to deduct TDS under Section 194IA of Income Tax Act 1961.
The TDS rate is at 1% of the total sale amount which the buyer has to deduct. The TDS should be deducted by the buyer and not the seller.
If the sale consideration is less than ₹50 lakh, no TDS under Section 194IA of Income Tax Act will be required to be deducted.
If the sale payment is done in instalments, the TDS will have to be deducted on each instalment that is paid.
All of the charges like nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other similar charges that are incidental to the transfer of immovable property should be included in consideration for the property. This is applicable for the immovable property purchased on or after September 1, 2019.
The TDS will have to be paid on the entire sale amount. This requirement is applicable even when there is more than 1 buyer or seller. After the budget 2019 amendment to Section 194IA of Income Tax Act 1961, if on September 1, 2019, you have bought a house for ₹55 lakh, paid ₹3 lakh for parking fees, ₹1 lakh for water facility and ₹1 lakh for electricity, your sale consideration will be ₹60 lakh. You will have to pay TDS on ₹60 lakh at 1%, which would be ₹60,000. In case the transaction is done from May 14, 2020, to March 31, 2021, the rate is 0.75%
The immovable property buyer does not need a TAN (Tax Deduction Account Number) to pay the TDS for real estate. The payment can be made with the PAN.
The buyer has to obtain the PAN of the seller for making the payment of TDS on immovable property otherwise the TDS is deducted at 20%. Having the PAN of the buyer is also compulsory.
The TDS is either deducted at the time of payment, including payments done in instalments, or at the time of giving credit to the seller, whichever is earlier.
This TDS on the immovable property has to be paid by using Form 26QB. It should be done within 30 days from the end of the month in which TDS was deducted.
The buyer is required to furnish the TDS certificate in Form 16B to the seller after depositing the TDS to the government. It is available around 10-15 days after depositing the TDS.
The TDS certificate is available on the TRACES website.
TDS under Section 194IA of Income Tax Act 1961 has to be paid by using Form 16QB.
The payment has to be made within 30 days from the last day of the month when the sale was done.
After successful payment of TDS under Section 194IA of Income Tax Act, 1961, the buyer will receive Form 16B that they need to submit to the seller.
Downloading and generating Form 16B can be done from the TRACES portal.
Any person who gets into an agreement with a resident for transfer of immovable property is required to deduct TDS under Section 194IA of Income Tax Act.
The TDS has to be deducted by the buyer and not the seller.
If a buyer does not pay TDS on immovable property, he will be charged a penalty that can be up to ₹1 lakh.
Any person doing the specified payments that are mentioned under the Income Tax Act are required to pay TDS at the time of making such payments.
The TDS has to be only deducted by the buyer as it is his/her sole responsibility, even if the payment is financed by a home loan or the property is purchased from the builder.