TDS on purchase of immovable property under Income tax act
TDS i.e. Tax deduction at source is applicable on various business transaction. However, one of the transaction which could be business or could be personal transaction on which TDS is applicable is transaction in relation to purchase of immovable property.
Section 194-IA of Income tax Act, deals with the TDS on immovable property. Relevant extract of Section 194-IA is as under:
“(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 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.”
Important points to keep in mind in relation to Section 194IA is as under:
1. It starts with any person hence this section is not only restricted to business owners but any person who is purchasing an immovable property.
2. This section is only applicable where seller is a resident, if seller is non-resident TDS needs to be deducted u/s 195.
3. This section is not applicable on purchase of agricultural property i.e. rural agricultural land as it is not considered as Capital asset and not covered under taxation.
4. Rate of TDS is 1%.
5. TDS shall be deducted on sale consideration or value of property as per stamp valuation authority whichever is higher.
6. TDS needs to be deducted only if total consideration as mentioned in above point is above Rs. 50 lakh. However, no TDS is consideration for each buyer is below Rs.50 lakh even if total value of property is above Rs.50 lakh. Read more: No TDS u/s 194IA if consideration for each buyer below Rs. 50 lakh [Read ITAT order] – Taxontips
7. While calculating consideration it shall include all incidental charges that needs to be paid for purchasing such property i.e. club fees, membership fees etc.
8. While deducting TDS please check if PAN of the buyer is operative or not otherwise TDS at 20% needs to be deducted. Read more at: Inoperative PAN resulting in TDS notice to deduct TDS at the rate of 20%. Here’s why? – Taxontips
9. TDS can be deposited and deducted directly on e-filing website by logging in through PAN and buyer need not take any TAN for deducting such TDS.
10. TDS needs to be deducted at each payment or credit whichever is earlier. TDS which has been deducted needs to be deposited with Income tax department through Form 26QB on e-filing portal within 30 days from the end of month in which TDS has been deducted. If TDS is not deducted and deposited it can attract interest and late fees.
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