TDS on purchase of Immovable Property - 194IA
TDS on Sale of Immovable Property: A Complete Guide
Under Section 194-IA of the Income Tax Act, all assesses(buyers) who purchase immovable property for a consideration (actual consideration or Stamp Duty Value, whichever is higher) of more than ₹50 lakh, are required to deduct TDS at 1% of the consideration(actual consideration or Stamp Duty Value, whichever is higher). The TDS deduction is applicable regardless of whether the seller is a resident or non-resident. (Annexure 1 for bare text)
Note: This article is made with the assumption that the seller is a Resident Indian, however if the seller is a Non Resident then then section 195 will be attracted and different procedures and rules will apply.
Who is Required to Deduct TDS?
This section is applicable to all assessees (buyers) including individuals, HUF and Companies (including Individuals and HUF who are not liable to audit under section 44AB of the Income Tax Act)
to attract this section the following conditions must be met,
There is a transfer of immovable property, here “immovable property” means any land (other than rural agricultural land) or any building or part of a building for example, Shop, residential flat, residential house, plot of land and office space.
Consideration must exceed ₹50 lahks, here the consideration means actual consideration agreed upon or stamp duty value whichever is higher.
This section does not cover the compulsory acquisition of land by the government. (it is covered under section 194LA)
Buyer is not required to have TAN to deduct TDS under section 194-IA. The buyer can use their PAN to deduct and deposit the TDS.
Buyer is required to have a PAN to deduct and deposit the TDS.
When to Deduct TDS?
Assessee (buyer) must deduct TDS at the time of payment of consideration (whether in full or in part)or crediting the consideration in books, whichever is earlier.
Payment made in part: TDS must be deducted at the time of the payment, in proportion to the amount being paid or credited.
Advance Payment: If an advance is paid for the property, TDS must be deducted at the time of the advance payment and only on the advance amount. The remaining will be paid with the actual payment of the remaining consideration
Instalment Payment: TDS will be deducted at the payment of each instalment, in proportion to the amount being paid in that instalment.
When to Pay?
The deductor must pay the tax so deducted within 30 days of the end of the month in which TDS was deducted. The payment is to be made through form 26QB.
What rate and value to deduct?
The TDS threshold of ₹50 lakh applies to the higher value between the Stamp Duty Value and the actual consideration.
TDS must be deducted at a rate of 1% of the higher of the actual consideration or Stamp Duty Value (SDV).
Example: If you purchase a property for an actual consideration of ₹40 lahks, but the SDV is ₹55 lakh, TDS will be deducted based on the SDV of ₹55 lahks, as it is higher than the actual consideration.
Cases of multiple buyers and sellers
Here are detailed case scenarios explaining how TDS provisions apply in various situations:
Case 1: Single Buyer, Single Seller
Scenario: You purchase a property for ₹40 lakh, but the SDV is ₹55 lakh.
TDS Applicability: TDS is calculated on the SDV (₹55 lakh) since it is greater than the actual consideration.
TDS Calculation: 1% of ₹55 lakh = ₹55,000.
Step-by-Step:
Deduct TDS of ₹55,000 (1% of ₹55 lakh).
File Form 26QB and generate Form 16B.
Case 2: Single Buyer, Multiple Sellers
Scenario: You buy a property for ₹80 lakh from two sellers. Each seller receives ₹40 lakh.
TDS Applicability: TDS must be deducted from each seller’s share of the sale price. If the aggregate consideration exceeds ₹50 lakh, TDS provisions will apply.
TDS Calculation: For each seller, TDS will be 1% of the actual consideration (₹40 lakh), i.e., ₹40,000 per seller.
Step-by-Step:
Deduct TDS for each seller based on their respective share of the consideration.
File Form 26QB for each seller and generate Form 16B.
Case 3: Multiple Buyers, Single Seller
Scenario: A single seller sells property to two buyers. The total consideration is ₹60 lakh, divided as ₹30 lakh each.
TDS Applicability: Since each buyer is paying less than ₹50 lakh but aggregate consideration exceeds ₹50 lakh, TDS will apply to individual payments. Thus, TDS should be deducted from the total value of the transaction.
TDS Calculation: For each buyer, TDS will be 1% of the actual consideration (₹30 lakhs), i.e., ₹30,000 per buyer.
Step-by-Step:
Calculate the total consideration (₹60 lakh).
Deduct 1% from the total (₹60,000).
Each buyer pays their portion of the TDS (₹30,000 each).
File Form 26QB for each buyer and generate Form 16B.
Case 4: Multiple Buyers, Multiple Sellers
Scenario: Two buyers purchase a property from three sellers for a total of ₹100 lakh.
TDS Applicability: The TDS must be calculated for each seller based on the actual consideration they receive, provided aggregate consideration exceeds ₹50 lakh.
TDS Calculation: 1% of each seller’s portion of the sale price.
Step-by-Step:
Determine the actual consideration each seller receives.
Deduct TDS for each seller based on their share.
File Form 26QB for each seller and generate Form 16B.
How to Deposit TDS?
Once the TDS is deducted, the buyer must deposit the TDS with the government.
Step-by-Step Guide:
Login to the TIN NSDL website and select "Tax Deduction and Collection Account Number (TAN)" if applicable.
Choose Form 26QB for the deposit.
Fill out the form with details of the property transaction, including the seller and buyer details, and the amount of TDS.
Pay the TDS amount and get the challan receipt.
After payment, file the statement with the TDS details.
After the TDS is deposited, the buyer must generate Form 16B. This form serves as the TDS certificate and must be provided to the seller. Form 16B can be downloaded from the TRACES website.
Conclusion
The provision for TDS under Section 194-IA requires deduction of TDS on the sale of immovable property. The TDS is based on the higher of the actual consideration or the Stamp Duty Value, and TDS must be deducted and deposited at the time of payment or crediting of consideration. proper calculation and timely deduction are advised, and relevant forms like Form 26QB and Form 16B should be filed to ensure compliance.
Annexure 1
Payment on transfer of certain immovable property other than agricultural land.
194-IA. (1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum [or the stamp duty value of such property, whichever is higher,] as income-tax thereon.
(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an [immovable property and the stamp duty value of such property, are both,] less than fifty lakh rupees:
[Provided that where there is more than one transferor or transferee in respect of any immovable property, then the consideration shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for transfer of such immovable property.]
(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.
Explanation.—For the purposes of this section,—
(a) "agricultural land" means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;
(aa) "consideration for transfer of any immovable property" shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property;
(b) "immovable property" means any land (other than agricultural land) or any building or part of a building;
[(c) "stamp duty value" shall have the same meaning as assigned to it in clause (f) of the Explanation to clause (vii) of sub-section (2) of section 56.]
Disclaimer: This article is based on the information available as of December 31, 2024. The content reflects the author's interpretations of Section 194IB of the Income Tax Act. While every effort has been made to ensure the accuracy of the information, the author does not guarantee its completeness or reliability. Readers are advised to consult with a professional tax advisor for specific advice tailored to their individual circumstances.