All You Need to Know About Section 194IA of the Income Tax Act

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All You Need to Know About Section 194IA of the Income Tax Act

Section 194IA of the Income Tax Act, 1961 deals with the tax deducted at source (TDS) on the transfer of immovable property (other than agricultural land) above a certain threshold limit. This section mandates the buyer of the property to deduct TDS from the payment made to the seller and deposit it with the government.

The threshold limit for the applicability of section 194IA is Rs. 50 lakhs. Therefore, if the sale consideration for the immovable property exceeds Rs. 50 lakhs, the buyer is required to deduct TDS at the rate of 1% from the payment made to the seller.

It is important to note that the buyer is responsible for deducting TDS under section 194IA, even if the seller is a non-resident or does not have a PAN. In case the seller does not have a PAN, the buyer is required to deduct TDS at the higher of the following rates: the rate specified in the Income Tax Act or at the rate of 20%.

The TDS deducted under section 194IA needs to be deposited with the government within 30 days from the end of the month in which the TDS was deducted. The buyer is also required to file a TDS return in Form 26QB within 30 days from the end of the quarter in which the TDS was deducted.

The seller can claim credit for the TDS deducted while computing their total tax liability for the relevant financial year. The TDS deducted under section 194IA can be viewed in the seller’s Form 26AS, which is a consolidated statement of TDS.

In case the buyer fails to deduct TDS or deposit it with the government, they may be liable to pay interest, penalty, and other consequences under the Income Tax Act.

Scope of Section 194IA: Section 194IA applies to the sale of immovable property, other than agricultural land. Agricultural land is excluded from the purview of this section. The term “immovable property” includes land, buildings, and any other fixtures attached to the land. The provision applies to both residential and commercial properties.

Threshold Limit for TDS: The threshold limit for TDS under Section 194IA is Rs. 50 lakhs. This means that if the sale consideration of the immovable property is less than or equal to Rs. 50 lakhs, the buyer is not required to deduct TDS under this section. However, if the sale consideration exceeds Rs. 50 lakhs, the buyer is required to deduct TDS at the rate of 1% on the entire sale consideration.

Rate of TDS: As mentioned above, the rate of TDS under Section 194IA is 1% of the sale consideration. In case the seller does not have a PAN, the buyer is required to deduct TDS at the rate of 20% or the rate specified in the Income Tax Act, whichever is higher.

Time Limit for Deposit of TDS: The buyer is required to deposit the TDS amount with the government within 30 days from the end of the month in which TDS was deducted. The TDS amount needs to be deposited using Challan 281 on the government’s TIN NSDL website.

Filing of TDS Return: The buyer is also required to file a TDS return in Form 26QB within 30 days from the end of the quarter in which the TDS was deducted. The Form 26QB contains details such as the PAN of the buyer and seller, the amount of sale consideration, and the amount of TDS deducted.

Consequences of Non-Compliance: If the buyer fails to deduct TDS or deposit it with the government within the stipulated time, they may be liable to pay interest, penalty, and other consequences under the Income Tax Act. The buyer may also face prosecution under the Act.

The seller may face difficulty in claiming credit for the TDS deducted if the buyer fails to deposit it with the government. Therefore, it is important for both the buyer and seller to ensure compliance with the provisions of Section 194IA.

In conclusion

Section 194IA of the Income Tax Act is an important provision that governs the TDS on the sale of immovable property. The provision aims to bring transparency in property transactions and prevent tax evasion. Buyers and sellers of immovable property should be aware of the provisions of this section to ensure compliance and avoid any legal consequences.

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Frequently Asked Questions (FAQs)

Q. What is Section 194IA of the Income Tax Act?
A. Section 194IA of the Income Tax Act requires the buyer of an immovable property (other than agricultural land) to deduct TDS at the rate of 1% on the sale consideration if it exceeds Rs. 50 lakhs. The TDS amount needs to be deposited with the government within 30 days from the end of the month in which TDS was deducted.

Q. What is the threshold limit for TDS under Section 194IA?
A. The threshold limit for TDS under Section 194IA is Rs. 50 lakhs. If the sale consideration of the immovable property is less than or equal to Rs. 50 lakhs, the buyer is not required to deduct TDS under this section.

Q. Who is responsible for deducting TDS under Section 194IA?
A. The buyer of the immovable property is responsible for deducting TDS under Section 194IA.

Q. What is the rate of TDS under Section 194IA?
A. The rate of TDS under Section 194IA is 1% of the sale consideration. In case the seller does not have a PAN, the buyer is required to deduct TDS at the rate of 20% or the rate specified in the Income Tax Act, whichever is higher.

Q. What is the time limit for deposit of TDS under Section 194IA?
A. The buyer is required to deposit the TDS amount with the government within 30 days from the end of the month in which TDS was deducted.

Q. What is Form 26QB?
A. Form 26QB is a TDS return that needs to be filed by the buyer of the immovable property within 30 days from the end of the quarter in which the TDS was deducted. The Form 26QB contains details such as the PAN of the buyer and seller, the amount of sale consideration, and the amount of TDS deducted.

Q. What are the consequences of non-compliance with Section 194IA?
A. If the buyer fails to deduct TDS or deposit it with the government within the stipulated time, they may be liable to pay interest, penalty, and other consequences under the Income Tax Act. The buyer may also face prosecution under the Act. The seller may face difficulty in claiming credit for the TDS deducted if the buyer fails to deposit it with the government.

Q. Is agricultural land covered under Section 194IA?
A. No, agricultural land is excluded from the purview of Section 194IA. The provision applies only to the sale of immovable property (other than agricultural land).

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