Analysis TDS Section 194-IA on Transfer of Immovable Properties

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Brief Summary of TDS Section 194-IA

Analysis Section 194-IA Under TDS

In this article, certain provisions and scope of section 194-IA are discussed, as well as the payments covered, payment recipients, conditions to be satisfied before section 194-IA would apply, tax deductions at source, the effect of not providing a PAN on tax rates, Tax Deduction and Collection Account Numbers, and the furnishing of tax deduction statements by tax deductor.

1. Individuals Are Responsible to Deduct TDS u/s 194-IA

A person (transferee), excluding the individual, referred to property sale under TDS section 194IA with a penalty is liable to pay to the resident transferor any sum through the method of consideration for the transfer of any immovable property (excluding the agriculture land) would be responsible for the deduct tax.

2. Meaning of The Immovable Property

“Immovable property” is directed towards any land or any building or the portion of a building.

3. Agriculture Land Meaning

Agricultural land indicates agricultural land in India, not existing as land located in any area referred to in items (a) and (b) of section 2(14)(iii).

Items a and b of section 2 (14) (iii) are mentioned as:

Agriculture land situate:

  • In any area which comes in the jurisdiction of the municipality whether called as a municipality, municipal corporation, reported area committee, town area committee, town committee, town committee, or via any additional name or a cantonment board and which has a population of not less than 10,000.
  • In any area within the distance, measured aerially:

(i) not exceeding 2 km from the local limits of any municipality or cantonment board referred to in item (a) and held with the population exceeding 10,000 but not more than 1,00,000.

(ii) not exceeding 6 km, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population exceeding than 1,00,000 but not more than 10,000,00.

(iii) not more than 8 km, from the local threshold of any municipality or cantonment board referred to in item (a) and which has a population exceeding 10,000,00.

Population recalls the population as per the last preceding census of which the concerned figures have been made prior to the first day of the former year.

4. Deduction of Tax Timing

Tax is to be deducted:

  • During the time of credit of these sums to the account of the transfer or
  • During the time of the payment of these sums in cash or through providing the cheque or draft or through any other mode, whichever is earlier.

5. TDS Rate

The TDS rate for the case of transfer of the immovable property will be 1% of the consideration or the value of the stamp duty, whichever is higher.

6. Surcharge or Health Education Cess Would be Added?

No surcharge or health and education cess will be added at the mentioned above rates.

7. Non-delivery of Pan – TDS of 20%

8. In the case of a transfer of specific real estate, no tax is to be deducted

For the given below cases, the tax is not to be deducted at the source beneath section 194-IA:

  • The immovable property transferred is rural agricultural land.
  • The immovable property has been compulsorily obtained beneath any law.
  • The sum of the amount of recognizing the transfer of the immovable property is lower than Rs 50,00,000.

9. Section 194-IA: Deposit of Tax Deducted at Source

Notification No. 39/2013, dated 31.5.2013 has mentioned the process to deposit the tax deducted at source, which is described beneath:

  1. Challan-cum-statement in Form No. 26QB– To be furnished in 30 days from the finish of the month where the deduction would be done including the payment of the tax.
  2. Information needed to file Form No. 26QB
  • PAN OF Seller & Buyer
  • Agreement to sell or letter of intent that points to the payment date and the consideration amount.

3. Whether TAN Required for Transferee? – No

10. To provide TDS certificates of deductions pursuant to section 194-IA [Rule 31(3A)], here is the form, time limit, and process.

Form No.16B
The individual liable towards the deduction of tax beneath section 194-IA would fill the certificate of deduction of tax at source in Form No. 16B to the payee in 15 days from the last date of filing the challan cum statement in Form No. 26QB.

Extract of Section 194-IA – Bare Act as amended by Budget 2022

  1. Any individual, as a transferee, liable to pay (other than the individual referred to in section 194 LA) to the resident transferor any sum through the method of consideration towards the transfer of any immovable property (other than the agricultural land), will during the time of credit of these sum to the account of the transferor or during the payment time of these sum in cash or through the issue of the cheque or draft or through any additional mode, whichever is earlier, deduct the amount identical to 1% of these sum or the stamp duty value of these property (revised by budget 2022), whichever is higher, as the income tax on it.
  2. No deduction beneath sub-section 1 will be made in which the consideration for the transfer of the immovable property and the stamp duty value of these properties would both change by the budget 2022 is lower than Rs 50,000,00.
  3. The provision of section 203A will not apply to the individual needed to deduct the tax as per the provisions of this section.

Explanation. Towards the intention of this section,

  1. Agricultural land pointed towards the agricultural land in India, not as land located in any area referred to in items a and b of sub-clause (iii) of clause (14) of section 2.
  2. “immovable property” rendered towards any land (excluding agricultural land) or any building or part of a building.
  3. Stamp duty value will pose a similar meaning as assigned to it in clause (f) of the Explanation to clause (vii) of sub-section (2) of section 56.

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