Section 194IA of Income Tax Act

Property tax - is also known as house tax. It is the tax that is levied on the owners of real estate by the concerned authorities like the municipal corporation or municipality. This is being utilized for the running and maintenance of local and public amenities like roads, sewage, parks, infrastructure, and lighting services.

This tax is usually levied on various real estate properties like commercial and residential buildings, and attached land and several multiple improvements are made to the property, but this is not applicable on vacant plots of land with no adjoining property or buildings. 

What is Section 194IA of the Income Tax Act?

Section 194IA offers the deduction of TDS on the purchase of immovable property at the time of a transaction. Until the introduction of Section 194IA, the Income Tax Act for TDS, and the sale of immovable property by the non-resident and compulsory acquisition of particular immovable properties.

The Finance Act of 2013 introduced Section 194IA to capture the transaction of purchase of immovable property by an Indian resident taxpayer.

A person, when he is a transferee, is responsible for paying an amount as a consideration to an Indian resident transferor against a transfer of any immovable property and must deduct TDS. The sale of that consideration needs to be greater than a value of Rs. 50 lakhs. 

In accordance with Section 194IB, the payment of a lease, sublease, or tenancy in any of the following properties may be regarded as "rent."

  • Plant
  • Furniture
  • Fittings
  • Land
  • Land with factory
  • Building with factory
  • Equipment or Machinery

Prerequisites of Section 194 IA TDS

The Section 194IA stipulates the following:

  • TDS on the property will always be deducted by the buyer and never by the seller.
  • There are no applicable TDS under Section 194IA in case the transaction is worth less than Rs. 50 lakhs.
  • The TDS rate is at - 1% of the total sale amount, which the buyer has to deduct. The TDS needs to be deducted by the buyer and not the seller.
  • If the sale payment is made in installments, the TDS would have to be deducted on every installment that is paid. 
  • All of the charges are like the nature of club membership fee, car parking fee, water facility fee, electricity fee, maintenance fee, and more. It is applicable for the immovable property purchased on or after September 1, 2019.
  • The immovable property buyer will not need a TAN.
  • The TDS would have to be paid on the wholesale amount. This need is needed even when there is more than a buyer or seller. 
  • The buyer needs to get the PAN of the seller for making the payment of TDS on the immovable property, or the TDS is deducted at 20%. Having a PAN for the buyer is compulsory. 
  • TDS is either deducted during the time of payment, inclusive of payments that are done in installments, or at the time when giving credit to the seller, whichever option is earlier. 
  • The TDS on the immovable property needs to be paid by using Form 26QB. It needs to be done within a period of 30 days and from the end of the month in which TDS was deducted. 
  • The buyer needs to furnish the TDS certificate in Form 16B to the seller after the deposit of the TDS to the government. It is available around 10 to 15 days after the deposit of the TDS.

Payment of TDS Under Section 194IA

Any money deducted in accordance with Section 194ia must be deposited with the central government. The deadline is 30 days after the month's end when the deduction occurs. The statement-cum-challan in the 26QB form ought to be included. The deposit can be made to any other authorized banking institution via electronic remittance.

Time of Deduction

Whenever it occurs first, the buyer must deduct TDS on the subsequent occurrence.

  • When the transferor's account is credited with that amount.
  • At the moment the amount is paid, whether cash, check, draught, or another method is used.

The Penalty of the TDS Non-Payment

The registrar and sub-registrar office submit the Annual Information Return (AIR) to the income tax division. Any immovable property's purchase and sale details, as well as its value, are contained in such AIR.

Therefore, the income tax agency records it if a purchaser does not deduct TDS, does not deposit TDS, or deducts TDS at a reduced rate. The purchaser will receive notification of such default from the income tax department.

Interest on no TDS deduction, penalty, interest on non-payment, and prosecution may all be applicable depending on the form of default.

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