Section 194IA | TDS on sale of immovable property

Last updated: 26 April 2021

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Quick Summary

Section 194IA of the Income Tax Act requires buyers to deduct Tax Deducted at Source (TDS) on the purchase of immovable property if the sale consideration is Rs. 50 lakhs or more. This applies to properties other than rural agricultural land, and the seller must be a resident of India. The TDS rate is 1% (or 0.75% for a specific period) of the sale consideration, which includes various incidental charges. The buyer must file Form 26QB and can deposit the TDS without a TAN, subsequently issuing Form 16B to the seller.

Introduction

This section is introduced to cover high value property transactions under the Tax net. This section intends to cover the Gross receipts/Sale consideration received by the Seller on the sale of immovable property. TDS is to be deduced by the person paying the above consideration i.e. buyer.

Let’s understand Where, When and How much TDS is to deducted in this section.

Where is TDS required to be deducted under Section 194IA?

TDS is to be deducted if all of the following conditions are met:-

Amount of *Sale Consideration is Rs. 50 lakhs or more
Property being sold is Immovable property other than RURAL agricultural land.
Seller of property is Resident of India
If property is not being compulsorily acquired under any law (which is governed by Section 194LA separately)

*Sale Consideration in context of this section includes charges of all nature of club membership fees, car parking fees, electricity or water fees, maintenance fees, advance fees or any other charges of similar nature which are incidental to transfer of immovable property.

TDS on Property Sale: Section 194IA Explained

When is TDS to be deducted?

TDS under Section 194IA is to be deducted at earliest of the following:-

Credit of such sum in account of transferor or
Payment of such sum in cash or by cheque or by draft or by any other mode

How much TDS is to be deducted?

TDS is to be deducted @1% of Sale consideration received

The above rate of 1% was amended to 0.75% for the period 14.05.2020 to 31.03.2021 due to COVID-19(section 197B)

Non Applicability of Section 203A

Unlike other sections of TDS, under this section, The buyer (doing deduction of TDS) is not required to obtain TAN to deduct and deposit TDS under this section. Under this section, he can deposit TDS to Government's Account without using TAN number following few simple steps explained below.

Steps to deposit tax deducted under Section 194IA

The buyer of property needs to file Form 26QB which is used to deposit tax deducted under this section. The buyer of the property needs to follow below mentioned steps in order to deposit tax deducted from sale consideration to be paid to seller.

Step 1: The buyer has to go to: https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp .

Step 2: Click on Form 26QB and select 0020 in case one is corporate payer and 0021 in case one is non-corporate payer and then necessary details need to be filled out.

Step 3: Selecting mode of payment-Here buyer can either choose e-tax payment immediately option and thus can pay using Net banking facility or he can choose e-tax payment on the subsequent date option and thus can generate challan and then pay manually through visiting a bank.

Step 4: Go to Traces Website:-

Visit: https://www.tdscpc.gov.in/app/tapreg1.xhtml in case of First time user to register and then register by filling out necessary details.
Visit: https://www.tdscpc.gov.in/app/login.xhtml in case already registered and Login using credentials

Step 5: Once registered/Logged in, One can download Form 16B which is a TDS certificate to be issued by Buyer to Seller as proof of deduction and deposit of TDS so that seller can claim it in his Income tax return. Form 16B is available around 7 days after the tax has been duly deposited.