Section 194IA of the Income Tax Act, 1961 is a provision that pertains to the deduction of tax at source (TDS) on the transfer of certain immovable properties. Enacted to ensure the collection of taxes on income arising from the transfer of immovable property, this section places an obligation on the buyer to deduct TDS at the time of making payment to the seller. Let's delve into the details of Section 194IA:
Key Provisions of Section 194IA:
Applicability:
Section 194IA applies to transactions involving the transfer of immovable property (other than agricultural land) where the consideration or market value of the property is Rs. 50 lakhs or more.
Scope of Immovable Property:
The term "immovable property" encompasses land (including agricultural land), buildings, and any rights attached to these properties.
However, this section specifically excludes agriculture land for tax deduction.
TDS Deduction Rate:
The buyer is required to deduct TDS at the rate of 1% of the consideration amount.
Threshold Limit:
TDS is applicable when the consideration for the transfer or market value of immovable property is equal or more than Rs. 50 lakhs. If the consideration and market value of property is equal to or less than Rs. 50 lakhs, TDS is not required to be deducted.
Time of Deduction:
TDS is deducted at the time of credit of the sum to the account of the seller or at the time of payment, whichever is earlier. If the payment is made in installments, TDS is required to be deducted on each installment.
Consideration:
Consideration 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
PAN of the Seller:
It is mandatory for the buyer to obtain the Permanent Account Number (PAN) of the seller and furnish the same to the income tax authorities. Seller can take the benefit of TDS deducted in his hand at the time of filing Income Tax return for the relevant year.
If Seller/transferor is non resident:
This section does not apply if seller/transferor is non resident. In that case, TDS will have to be deducted at higher rates under other section as per prevailing provision of the Income Tax. Seller may file an application for lower deduction of tax with Income Tax Authority.
Compliance and Procedure:
TDS Payment and Return Filing:
After deducting TDS, the buyer is required to deposit the deducted amount to the government within the stipulated time frame. A TDS return also needs to be filed providing details of the transaction.
Form 26QB:
The buyer will have to file form 26QB to pay the TDS online. Buyer can file this form after login at Income Tax Portal using his/her credentials. This form requires details such as PAN of the buyer and seller, property details, transaction amount and tds etc.
TDS Certificate:
The buyer is obligated to furnish a TDS certificate (Form 16B) to the seller. The TDS certificate contains details of the TDS deducted and deposited.
Conclusion:
Section 194IA serves the dual purpose of ensuring tax compliance and facilitating the tracking of high-value property transactions. By making the buyer responsible for deducting TDS, the government aims to create a system that helps prevent tax evasion and ensures the seamless collection of taxes on property transactions. Buyers and sellers involved in such transactions should be aware of the provisions of Section 194IA to ensure proper compliance with the tax laws. It's advisable to consult with tax professionals or legal experts for accurate and updated guidance, as tax laws are subject to amendments.
Exact Text of Section 194IA:
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 26a[immovable property and the stamp duty value of such property, are both,] less than fifty lakh rupees.
(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.]
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