Section 194IA of the Income Tax Act, 1961, is a provision that was introduced in the year 2013. It pertains to the deduction of tax at source (TDS) on the transfer of certain immovable properties. In this blog, we will discuss the basics of Section 194IA and its implications.
What is Section 194IA?
Section 194IA of the Income Tax Act, 1961, states that any person, being a transferee, responsible for paying to a resident transferor any sum by way of consideration for the transfer of any immovable property (other than agricultural land), shall deduct an amount equal to 1% of such sum as income tax at source 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 cheque or draft or any other mode, whichever is earlier.
In simple terms, if you buy a property that is not agricultural land from a resident seller, you will have to deduct 1% of the sale consideration as TDS and pay it to the government. The TDS deducted has to be deposited with the government within 30 days from the end of the month in which the deduction was made.
Who is covered under Section 194IA?
Section 194IA is applicable to all transferees who are responsible for paying any sum by way of consideration for the transfer of any immovable property (other than agricultural land) to a resident transferor. The provision is not applicable to the transfer of agricultural land.
It is important to note that the provision is applicable only when the consideration for the transfer of the property is equal to or exceeds Rs. 50 lakhs. If the consideration is less than Rs. 50 lakhs, the provision will not apply.
Implications of Section 194IA
Section 194IA has several implications for both the buyer and the seller of the property. Let’s take a look at them.
For the Buyer:
The buyer has to deduct 1% of the sale consideration as TDS and deposit it with the government within 30 days from the end of the month in which the deduction was made.
If the buyer fails to deduct or deposit the TDS, he/she will be liable to pay interest at the rate of 1% per month or part of the month on the amount of TDS not deducted/deposited.
For the Seller:
The seller has to provide his/her Permanent Account Number (PAN) to the buyer. If the seller fails to provide PAN, the buyer will be liable to deduct TDS at the rate of 20% instead of 1%.
The seller can claim credit for the TDS deducted against his/her income tax liability at the time of filing the income tax return.
Conclusion
Section 194IA of the Income Tax Act, 1961, is a provision that has been introduced to ensure that tax is deducted at source on the transfer of certain immovable properties. The provision is applicable to all transferees who are responsible for paying any sum by way of consideration for the transfer of any immovable property (other than agricultural land) to a resident transferor. It is important for both the buyer and the seller to comply with the provisions of Section 194IA to avoid any penalties or interest payments.
Read more useful content:
- section 234e of income tax act
- section 286 of income tax act
- section 90a of income tax act
- section 40a(7) of income tax act
- section 226(3) of income tax act
- section 24 of income tax act
Frequently Asked Questions (FAQs)
Q. What is the rate of TDS under Section 194IA?
The rate of TDS under Section 194IA is 1% of the sale consideration paid to the resident transferor.
Q. Is Section 194IA applicable only to properties bought after 2013?
No, Section 194IA is applicable to all immovable properties (other than agricultural land) bought after June 1, 2013.
Q. Is TDS under Section 194IA applicable to joint owners of the property?
Yes, TDS under Section 194IA is applicable to joint owners of the property. The buyer is required to deduct TDS on the share of each co-owner in the property.
Q. Is Section 194IA applicable to NRI sellers?
No, Section 194IA is not applicable to NRI sellers. However, if the NRI seller has a PAN, the buyer is required to deduct TDS at the rate of 20% instead of 1%.
Q. What happens if the buyer fails to deduct TDS under Section 194IA?
If the buyer fails to deduct TDS under Section 194IA, he/she will be liable to pay interest at the rate of 1% per month or part of the month on the amount of TDS not deducted/deposited.
Q. What is the due date for depositing TDS under Section 194IA?
The TDS deducted under Section 194IA must be deposited with the government within 30 days from the end of the month in which the deduction was made.
Q. Can the seller claim credit for TDS deducted under Section 194IA?
Yes, the seller can claim credit for TDS deducted under Section 194IA against his/her income tax liability at the time of filing the income tax return.
Q. Is Section 194IA applicable if the sale consideration is less than Rs. 50 lakhs?
No, Section 194IA is applicable only when the consideration for the transfer of the property is equal to or exceeds Rs. 50 lakhs. If the consideration is less than Rs. 50 lakhs, the provision will not apply.
Q. What happens if the seller fails to provide PAN to the buyer?
If the seller fails to provide PAN to the buyer, the buyer will be liable to deduct TDS at the rate of 20% instead of 1%.
Q. Is Section 194IA applicable to the transfer of agricultural land?
No, Section 194IA is not applicable to the transfer of agricultural land. It is applicable only to immovable properties (other than agricultural land).
