TDS on the sale of property : Section 194-IA
Provisions of section 194-IA of the Income Tax Act deal with the requirement of deduction of tax at source (TDS) by the buyer at the time of purchase of the property (other than agricultural land). The provisions of section 194-IA are made effective from 1st July 2013.
In the current article, we will briefly understand the applicability of TDS on the sale of property; the rate, time and value on which TDS is deductible under section 194-IA; payment of TDS in Form 26QB; TDS certificate in Form 16B; levy of interest or imposition of penalty for non-deduction or late deduction and relevant Frequently Asked Questions.
Applicability of TDS on the sale of property as prescribed under section 194-IA –
TDS on the sale of the property is applicable once all the following conditions are satisfied –
Condition 1 – The buyer of the property is resident or non-resident;
Condition 2 – The seller of the property is resident; and
Condition 3 – Consideration for the transfer of property is more than INR 50 Lakhs.
When all the above conditions are satisfied, the buyer of the property is liable to deduct TDS under section 194-IA of the Income Tax Act.
Notably, provisions of section 194-IA are applicable to the ‘transfer of immovable property’. Accordingly, as explanation (b) of section 194-IA, ‘immovable property’ means any land or any building or part of the building. However, it doesn’t include agricultural land.
TDS under section 194-IA of the Income Tax Act doesn’t apply in the following circumstances –
1. When the sale consideration and the stamp duty value of the property is less than INR 50 Lakhs; or
2. When the immovable property transferred qualifies as an agricultural land; or
3. When the seller of the property is a non-resident.
Rate, time and value on which TDS is deductible under section 194-IA of Income Tax Act, 1961
The following table briefly explains the rate, time and value on which TDS is to be deducted by the buyer of the property under section 194-IA –
| Particulars | Details |
|---|---|
| The rate at which TDS is deductible under section 194-IA | 1% However, if the PAN of the seller is not available, TDS is to be deducted @ 20%. |
| Time of deduction of TDS under section 194-IA | Earlier of the following – At the time of credit of the amount to the account of the seller; or At the time of payment of the amount via cash/ cheque/ draft/ any other mode. |
| Value at which TDS is deductible under section 194-IA | Higher of the following – Consideration for transfer of property; or Stamp duty value |
Importantly, as explanation (aa) of section 194-IA, ‘consideration for transfer of property’ will include all the following charges, which are incidental to the transfer of property –
- Club membership fee;
- Car parking fee;
- Electricity facility fee;
- Water facility fee;
- Maintenance fee;
- Advance fee;
- Any other charges of similar nature.
Payment of TDS deducted under section 194-IA of Income Tax Act
As stated under section 194-IA(3) of the Income Tax Act, the buyer of the property liable to deduct TDS u/s 194-IA is not required to have a ‘Tax Deduction and Collection Account Number’ (TAN).
Accordingly, by following the below steps, the buyer of the property can pay TDS as deducted u/s 194-IA –
STEP 1 – Visit https://www.protean-tinpan.com/;
STEP 2 – Navigate the following path – Services > TDS on Sale of Property.
STEP 3 – Another page will appear, after following STEP 2. Click ‘Online form for furnishing TDS on property (Form 26QB);
STEP 4 – Out of various available option, go to option ‘TDS on Property (Form 26QB) and click ‘Proceed’;
STEP 5 – Fill up all the details appearing in Form 26QB column-wise i.e. Taxpayer Info; Address; Property Details; Payment Info;
STEP 6 – Submit Form 26QB;
STEP 7 – After confirmation, two buttons i.e., ‘Print Form 26QB’ and ‘Submit to the bank’ will be displayed. Click ‘Print Form 26QB’ to get the print of the same and click ‘Submit to the bank’ to make payment;
STEP 8 – Once the payment is successfully made, a challan counterfoil will be displayed.
It is important to note here that the TDS deducted under section 194-IA needs to be deposited by the buyer within a period of 30 days from the end of the month in which the TDS is deducted.
TDS Certificate in Form 16B
Once the TDS payment is done, the buyer of the property is required to issue a TDS certificate in Form 16B to the seller. Steps for downloading the same are summarized hereunder –
STEP 1 – Visit https://contents.tdscpc.gov.in/;
STEP 2 – Click ‘Login’;
STEP 3 – Enter appropriate Login credentials;
STEP 4 – Navigate the following path –
Downloads > Form 16B/16C/16D (For Buyer/Tenant/Payer)
STEP 5 – Enter/ select the following details –
• Form Type;
• Assessment Year;
• Ack No.;
• PAN of Seller/Landlord/Payee.
STEP 6 – Click ‘Proceed’;
STEP 7 – On the confirmation screen, click ‘Submit Request’;
STEP 8 – Note the request number to search for the download request;
STEP 9 – Click on ‘Requested Downloads’ for downloading the certificate.
It is to be noted here that prior to following the above steps, the buyer of the property needs to have registration under TRACES website. If not registered, the registration can be obtained by clicking ‘Register as New User’ on https://contents.tdscpc.gov.in/.
Interest/ penalty for late deduction or non-deduction of TDS under section 194-IA Interest for late deduction or late payment of TDS under section 194-IA will be leviable in the following manner –
| Particulars | Details |
|---|---|
| Non-deduction of TDS | 1% Per Month |
| Late Payment of TDS | 1.5% Per Month |
Penalty for late payment or late filing of Form 26QB will be imposable in the following manner –
| Particulars | Details |
|---|---|
| Late filing of Form 26QB | INR 200 per day till the failure continues |
| Late payment of TDS u/s 194-IA | The Assessing Officer may levy a penalty under section 271H of the Income Tax Act. Notably, a minimum penalty of INR 10,000 up to a maximum penalty of INR 1,00,000 may be imposed. |
Frequently Asked Questions (FAQs) on Applicability of TDS on sale of property
Frequently Asked Questions with regard to TDS provisions as covered under section 194-IA are answered hereunder –
1. What is 194IA?
As per section 194-IA, effective from 1st July 2013, the buyer of the property is required to deduct TDS if the sale consideration or the stamp duty value of the property is more than INR 50 Lakhs.
2. Who is responsible to deduct the TDS on sale of property?
The buyer of the property is liable to deduct TDS u/s 194-IA of the Income Tax Act on the sale consideration or stamp duty value.
3. How to pay TDS under section 194 IA?
After deducting TDS, the buyer of the property is required to make the payment to the Government via Form 26QB. TDS payment is to be made within a period of 30 days from the end of the month in which TDS is deducted.
4. How to claim refund under 194 IA?
Once the PAN of the seller is duly quoted by the buyer while making payment of TDS in Form 26QB, the same will be reflected in Form 26AS of the seller. Accordingly, based on the credit reflected in Form 26AS, a refund can be claimed.
5. Is 194IA applicable on agricultural land?
TDS provisions of section 194-IA are not applicable in case the immovable property purchased by the buyer qualifies as agricultural land.
6. Is Section 194IA applicable to NRI?
Provisions of section 194-IA are duly applicable in case the buyer is an NRI. However, if the seller is a non-resident, then, provisions of section 194-IA doesn’t apply.
7. How much TDS is applicable on property sale?
TDS @ 1% is applicable on the property sale.
8. When should you pay TDS on property purchase?
The buyer of the property is required to pay TDS on the property purchase within a period of 30 days from the end of the month in which TDS is deducted.