When you buy a property in India, you may be required to deduct tax at source (TDS) before making the payment to the seller. This is done under Section 194IA of the Income Tax Act, which mandates TDS on payment made for the transfer of an immovable property.
What is Section 194IA of the Income Tax Act?
Section 194IA of the Income Tax Act was introduced by the Finance Act, 2013 and came into effect from June 1, 2013. The section requires the buyer of an immovable property to deduct TDS at the rate of 1% of the sale consideration (i.e., the amount paid or payable for the transfer of the property) if the value of the property is equal to or exceeds Rs. 50 lakhs.
Who is liable to deduct TDS under Section 194IA?
The buyer of the property is responsible for deducting TDS under Section 194IA. The buyer can be an individual, Hindu Undivided Family (HUF), partnership firm, company, or any other entity that buys the property.
However, the section does not apply if the property is acquired by way of inheritance or gift or if the property is agricultural land.
When should TDS be deducted and deposited under Section 194IA?
The buyer should deduct TDS at the time of payment or credit of the sale consideration to the seller. If the sale consideration is paid in installments, TDS should be deducted on each installment.
The buyer is required to deposit the TDS with the government within 30 days from the end of the month in which the TDS was deducted. The TDS amount should be deposited using Challan No. 281.
What happens if TDS is not deducted or deposited?
If the buyer fails to deduct TDS or deposit the TDS with the government, they may be subject to penalty and interest under Section 201 and Section 220 respectively. The penalty can be as high as the amount of TDS that was not deducted or deposited.
Can the seller claim a refund of TDS?
Yes, the seller can claim a refund of TDS by filing an income tax return. The seller can claim a refund of the TDS amount if their total tax liability for the year is less than the TDS amount deducted.
Conclusion
Section 194IA of the Income Tax Act is an important provision that requires the buyer of an immovable property to deduct TDS on the sale consideration. It is essential to comply with the provisions of this section to avoid any penalties or interest. If you are planning to buy an immovable property, make sure you understand the provisions of Section 194IA and comply with them to avoid any legal complications.
Read more useful content:
- section 145 of income tax act
- section 10e of income tax act
- section 9 of the income tax act
- section 94b of income tax act
- section 206aa of income tax act
Frequently Asked Questions (FAQs)
Q: What is Section 194IA of the Income Tax Act?
A: Section 194IA of the Income Tax Act is a provision that requires a buyer of immovable property to deduct tax at source (TDS) at the rate of 1% of the sale consideration if the value of the property is Rs. 50 lakh or more.
Q: Who is required to deduct TDS under Section 194IA?
A: The buyer of the property is required to deduct TDS under Section 194IA.
Q: When is TDS to be deducted under Section 194IA?
A: TDS under Section 194IA is to be deducted at the time of making payment to the seller of the property.
Q: What is the rate of TDS under Section 194IA?
A: The rate of TDS under Section 194IA is 1% of the sale consideration.
Q: What is the sale consideration under Section 194IA?
A: The sale consideration under Section 194IA is the amount paid or payable for the transfer of the property.
Q: Is TDS to be deducted on the entire sale consideration or only on the amount exceeding Rs. 50 lakh?
A: TDS is to be deducted only on the amount exceeding Rs. 50 lakh.
Q: Is TDS to be deducted on the sale of agricultural land under Section 194IA?
A: No, TDS is not required to be deducted on the sale of agricultural land under Section 194IA.
Q: What is the time limit for depositing TDS under Section 194IA?
A: TDS under Section 194IA is to be deposited within 30 days from the end of the month in which TDS is deducted.
Q: What is the penalty for non-compliance with Section 194IA?
A: Failure to deduct TDS or deposit TDS within the prescribed time limit can result in a penalty, interest, and other consequences under the Income Tax Act.
Q: Can the buyer claim a refund of TDS under Section 194IA?
A: Yes, the buyer can claim a refund of TDS under Section 194IA if the actual tax liability of the seller is lower than the TDS deducted.
