Section 194IA of Income Tax Act: Payment of TDS, and how to pay TDS

The government’s tax on real estate is known as the property tax. It is also known as a property assessment or land tax. Property tax rates can vary widely depending on the geographic location and property value, which is often a significant expense for homeowners.

Table of Contents

In some cases, the property tax may be referred to as house tax, but this term is not as commonly used. Property taxes fund local government services such as schools, police, and fire departments. City or other municipal governments collect property tax at the local level. In some cases, the tax may be collected by the state government.

Section 194IA of Income Tax Act: An overview

Section 194IA of the ITA 1961 is a provision that requires individuals who sell immovable property (land or buildings) for more than Rs 50 lakhs to deduct tax at source at the rate of 1% of the sale consideration. It was introduced in the Finance Act of 2013 and has been in effect since then. The property buyer must deposit the tax deducted at source (TDS) with the government.

The provision applies to all buyers, including individuals, companies, and trusts. The property seller must furnish their PAN (permanent account number) to the buyer, and the buyer must report the sale and the TDS in their tax return.

This provision aims to ensure that tax is paid on the sale of immovable property and to reduce the tax compliance burden for property sellers.

It is important to note that the TDS deduction under Section 194IA is in addition to any other TDS that may apply to the payment being made. The payment recipient can claim credit for the TDS deducted under this section while filing their income tax return.

Section 194IA of Income Tax Act: Requirements

Section 194 IA of the Income Tax Act, 1961, deals with the deduction of tax at source (TDS) on the transfer of particular immovable property.

The following are the prerequisites for TDS to be deducted under Section 194 IA:

The property being transferred must be an immovable property, except agricultural land.
The consideration for the transfer of the property must be more than Rs. 50 lakhs.
The transfer must be made by an individual or a Hindu Undivided Family (HUF) to another individual or HUF.
The TDS is to be deducted by the transferee (the person acquiring the property) at the time of crediting the amount to the transferor’s account or at the time of payment, whichever is earlier.
The TDS should be deducted at 1% of the consideration for the transfer.
The TDS must be deposited to the Central Government’s credit within 30 days of the end of the month in which the deduction was made.
The transferee must provide a TDS certificate (Form 16B) to the transferor within 15 days of the return of the TDS’s due date.

Section 194IA of Income Tax Act: Payment of TDS

TDS (Tax Deducted at Source) under Section 194IA of the Income Tax Act refers to the tax deducted when a payment is made for transferring certain types of immovable property. The person making the payment is responsible for deducting TDS and depositing it with the government.

The TDS rate for payments made under Section 194IA is 1% of the payment amount. If the property being transferred is located in a rural area, the TDS rate is 0.75%.

There are some exemptions to the TDS requirement under Section 194IA. For example, TDS is not required if the payment is less than Rs 50 lakh (approximately USD 68,000). TDS is also not required if the property being transferred is a residential house and the consideration for the transfer is less than Rs 45 lakh (approximately USD 61,000).

If you are making a payment for the transfer of immovable property and are required to deduct TDS under Section 194IA, you must deposit the TDS with the government within 30 days of the tax deduction date. You must provide a TDS certificate to the payee in the correct format within 15 days of depositing the TDS with the government.

Section 194IA of Income Tax Act: How to pay TDS under this section

The procedures for paying TDS under Section 194IA are as follows:

Obtain a PAN (Permanent Account Number) if you do not have one already. PAN is required to pay TDS and also to file your tax returns.
Calculate the TDS amount: The TDS amount is 1% of the sale consideration or the property’s market value, whichever is higher.
Obtain a TAN (Tax Deduction and Collection Account Number): TAN is required to pay TDS. You can apply for TAN online through the NSDL (National Securities Depository Limited) website or offline by filling out Form 49B.
Deposit the TDS amount: You can deposit the TDS amount online through the NSDL website or offline by visiting a bank. To deposit the TDS amount offline, you must fill out a Challan 280 and submit it along with the TDS amount at a bank.
Issue a TDS certificate: After depositing the TDS amount, you must issue a TDS certificate to the transferor (seller). The TDS certificate needs to be on Form 16B and include information like the PAN of the transferee (buyer), TAN of the transferee (buyer), PAN of the transferor (seller), TDS amount, and payment date.
File a TDS return: After depositing the TDS amount and issuing the TDS certificate, you need to file a TDS return. You can file the TDS return online through the NSDL website or offline by filling out Form 26QB.

FAQs

What is the rate of tax to be deducted under section 194IA?

The tax must be deducted at the rate of 1% of the consideration for the transfer of the immovable property.

Is there any threshold limit for tax deduction under section 194IA?

Yes, tax is required to be deducted under section 194IA only if the consideration for the transfer of the immovable property is more than Rs. 50 lakhs.

Is tax deduction under section 194IA required in all cases of transfer of immovable property?

No, tax deduction under section 194IA is not necessary for some instances, such as transfer of immovable property by gift or will, transfer of immovable property from the government, local authority or a statutory body, transfer of agricultural land, etc.

Is it necessary to obtain a tax deduction and collection account number (TAN) for deducting tax under section 194IA?

Yes, it is necessary to obtain a TAN for deducting tax under Section 194IA. The person responsible for deducting tax under this section is required to furnish the details of the tax deducted, along with the TAN, to the payee in Form 16B and also needs to deposit the tax deducted with the government using Form 26QB.

Was this article useful?

😃 (0)
😐 (0)
😔 (0)

Housing News Desk

Housing News Desk is the news desk of leading online real estate portal, Housing.com. Housing News Desk focuses on a variety of topics such as real estate laws, taxes, current news, property trends, home loans, rentals, décor, green homes, home improvement, etc. The main objective of the news desk, is to cover the real estate sector from the perspective of providing information that is useful to the end-user.

Facebook: https://www.facebook.com/housing.com/

Twitter: https://twitter.com/Housing

Email: [email protected]