Section 194IA of Income Tax Act provides the provision for TDS on purchase of immovable property (other than rural agricultural land) by the resident.

This section provides the responsibility of the transferee / purchaser to deduct TDS on such transactions and deposit the same with the government on time.

TDS on purchase of immovable property is deductible by keeping in mind of certain conditions.

So, let’s understand in detail of section 194IA (TDS on purchase of immovable property):


    What is section 194IA of Income Tax Act 1961?

    As per section 194IA any person being a transferee / purchaser (other than person referred to in section 194LA) responsible for paying the consideration to a resident transferor (seller) against the transfer of any immovable property (other than rural agricultural land) shall have to deduct TDS while making the payment.

    TDS on Purchase of Immovable Property (Section 194IA)

    Point to be noted is that here the transferor (seller) must be resident. If seller is non-resident then section 194IA would not be applicable.

    But there is no such requirement of transferee (purchaser) a resident or non-resident but he should not be the person referred to in section 194LA (compulsory acquisition of immovable properties).

    Also Read: Section 271AAD: (Penalty for Fake Invoices / False Entry)

     

    What is the condition for TDS on purchase of Immovable property under section 194IA?

    The foremost condition is that TDS on immovable property under section 194IA is applying only on purchase of immovable property above the value of Rs.50 Lacs.

    Means there would be no TDS under section 194IA if the consideration for the transfer of an immovable property is less than Rs.50 Lacs. If it is Rs.50 Lacs or more then TDS to be deducted and it is deducted on full consideration.

    Example:

    Mr. A (transferee) purchased an immovable property of Rs.70 lacs from Mr. B (transferor). Mr A has to deduct TDS on Rs.70 Lacs and not excess amount over Rs.50 lacs (i.e. only on Rs.20 lacs). TDS to be deducted on full consideration i.e. Rs.70 lacs.

     

    Who is not applicable under section 194IA on purchase of immovable property?

    Following are the case where section 194IA (TDS on purchase of property is not applicable):

    • Immovable property transferred is a rural agricultural land; or
    • Immovable property has been compulsory acquired under any law (covered under section 194LA), or
    • Total consideration for the transfer of immovable property is less than Rs.50 lacs; or
    • If the transferor is non-resident [Here TDS shall be deducted under section 195].

     Also Read: Section 194N of Income Tax Act (TDS on Cash Withdrawal)


    When to deduct TDS under section 194IA on purchase of immovable property?

    TDS to be deducted under section 194IA by transferee upon consideration paid for purchase of any immovable property:

    • At the time of credit of amount to the account of transferor; or
    • At the time of payment of such amount

    whichever is earlier

    Note: Payment can be made through cash or by issue of cheque or draft or by any other mode.

     

    What is the rate of TDS under section 194IA?

    Cases

    Rate of TDS

    Normal Rate

    1%

    [TDS from 14-05-2020 to 31-03-2021]

    0.75%

    If PAN not quoted

    20%

     

    Note: TDS will be at basic rate. No Surcharge and Health & Education Cess shall be added.

     Also Read: Section 115ba, 115baa, 115bab of Income Tax Act 1961


    Is purchase of immovable property under section 194IA should be situated in India?

    For the purpose of this section 194IA (TDS payment on purchase of property) it is not necessary that immovable property should be situated in India.

    Even if a person purchases immovable property outside India from a person resident in India then he is liable to deduct TDS on total consideration.

     

    Which are the other fees and charges included in consideration under section 194IA?

    For the purpose of this section 194IA (TDS on purchase of Immovable property), Consideration includes the fees and charges incidental to transfer of the immovable property:

    • Club membership fees
    • Car parking charges
    • Electricity or water facility charges
    • Maintenance charges
    • Any other charges of similar nature which are incidental to the transfer of immovable property

     

    How to treat joint ownership of transferor (sellers) under section 194IA?

    In case sellers have jointly ownership of an immovable property and if total consideration is Rs.50 lacs or more then TDS to be deducted as per section 194IA even if each of the co-owner’s consideration is less than Rs.50 lacs.

    Also Read: Section 234F: Penalty for late filing of income tax return


    How to calculate TDS under section 194IA if property partly financed by the banker?

    Irrespective of the fact that the amount of consideration is financed by the bank; transferee has to deduct TDS on the entire amount of consideration.

    Example:

    If Mr. A (transferee) purchases an immovable property of Rs.70 lacs from Mr. B (transferor) and from which Rs. 40 lacs is financed by the Bank. Then is this case as the Rs.70 Lacs exceed the threshold limit of Rs. 50 lac than TDS has to be deducted by Mr. A on Rs.70 lacs (i.e. Rs. 70 lacs * 1%= Rs. 70,000).

    So in this case the bank pay to Mr. B Rs.40 Lacs and Mr. A will pay Rs.29,30,000 (Rs.30,00,000 – Rs. 70,000) after deducting TDS.

     

    Conclusion

    Section 194IA of Income Tax Act provides a provision for TDS on purchase of immovable property where the TDS is to be deducted by transferee (purchaser) at the rate of 1% [14-05-20 to 31-03-21 @0.75%] if the consideration Rs.50 lacs on more.

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