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.
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:
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:
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:
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.