Section 194IA of the Income Tax Act is a provision that requires a buyer of immovable property to deduct TDS (tax deducted at source) at the rate of 1% of the sale consideration amount, if the property value exceeds Rs. 50 lakh. The buyer is responsible for deducting the TDS at the time of making payment to the seller and depositing it with the government.
This provision is applicable to all types of immovable property, including land, building, apartment, and any other type of property that is not considered movable. It is important for buyers to comply with this provision to avoid penalties and legal consequences. Additionally, sellers can claim a refund for any excess TDS deducted, or adjust it against their tax liability.
Applicability of Section 194IA
Section 194IA applies to all transactions involving the sale of immovable property, where the sale consideration exceeds Rs. 50 lakhs. The provision is applicable to both residential and commercial properties, including land and buildings.
It is important to note that Section 194IA applies only to transactions where the buyer is an individual or an HUF (Hindu Undivided Family). If the buyer is a company, partnership firm, or any other entity, then Tax Deducted at Source is required to be deducted under Section 194-IA of the Income Tax Act.
TDS Rates under Section 194IA
The TDS rate under Section 194IA is 1% of the sale consideration. The buyer is required to deduct TDS at the time of making the payment to the seller, and remit the same to the government within 30 days from the end of the month in which the deduction was made.
Exemptions under Section 194IA
Section 194IA provides for certain exemptions from TDS on the sale of property. These include:
- If the sale consideration is less than Rs. 50 lakhs, then TDS is not required to be deducted.
- If the buyer is acquiring the property for personal use, and not for any commercial purpose, then TDS is not required to be deducted.
- If the seller is a non-resident, then TDS is required to be deducted under Section 195 of the Income Tax Act, and not under Section 194IA.
Compliance Requirements under Section 194IA
Buyers who are required to deduct TDS under Section 194IA are also required to comply with certain procedural requirements. These include:
- Obtaining a valid PAN (Permanent Account Number) of the seller.
- Filing of TDS return in Form 26QB within 30 days from the end of the month in which TDS was deducted.
- Issuing a TDS certificate to the seller in Form 16B within 15 days from the due date of filing of TDS return.
Key Differences between Section 194IA and Other TDS Provisions
- Section 194IA is not the only provision in the Income Tax Act that deals with TDS on the sale of property. Other relevant provisions include Section 194-IA, Section 194-IB, and Section 195.
- Section 194-IA applies to TDS on the sale of immovable property, where the consideration exceeds Rs. 50 lakhs, and the buyer is not an individual or an HUF.
- Section 194-IB applies to TDS on rental payments made by individuals and HUFs, where the annual rent exceeds Rs. 50,000.
- Section 195 applies to TDS on payments made to non-residents, including payments for the sale of property.
To pay TDS on property through the Income Tax e-filing portal, you need to follow these steps:
- Go to the Income Tax e-filing portal and log in to your account.
- Click on e-Pay Tax in the dropdown menu after choosing e-File from the menu.
- To begin a new payment transaction, click “+ New Payment.”
- Click the Proceed button after selecting 26QB TDS on Property.
- Your account information will be used to automatically fill in the buyer’s information. If modifications are necessary, make them and then click Continue.
- Click Continue after entering the seller’s information, including their PAN and address.
- Enter the property information, such as the type of property, the address, and selling information like the date of the agreement and the sale price.
- Click Continue when you’re finished.
- Add payment details and select your preferred payment mode.
- Complete the payment process.
- Once the payment is successful, a challan will be generated, which you can download and keep for future reference.
By following these steps, you can easily pay TDS on property through the Income Tax e-filing portal. It is a simple and convenient way to fulfill your tax obligations.
To download Form 16B, which is a TDS certificate for tax deducted at source on the sale of property, you need to follow these steps:
- Go to the TRACES website and log in with your credentials.
- Click on the ‘Downloads’ tab and select ‘Form 16B’.
- Enter the required details such as the assessment year, acknowledgement number, and PAN of the seller.
- Verify the details and click on the ‘Proceed’ button.
- The system will generate a unique TDS certificate number and provide a link to download the Form 16B.
- Click on the link to download the Form 16B in PDF format.
- The password to open the downloaded PDF file will be the date of birth of the seller in the format DDMMYYYY.
Due dates for TDS deposits
As per Section 194IA of the Income Tax Act, the TDS amount deducted on the sale of immovable property must be deposited with the government. Additionally, the buyer must provide a TDS certificate in Form 16B to the seller within 15 days of the due date for furnishing the challan-cum-statement in Form 26QB. The buyer must provide the challan-cum-statement within 30 days from the end of the month in which the TDS was deducted. It is important to adhere to these timelines to avoid any penalties or interest charges.
Penalties for Failure to Pay TDS Per Section 194IA
Under Section 194IA of the Income Tax Act, if the buyer fails to deduct TDS or fails to deposit the TDS with the government, they may be subject to penalties and interest charges. The penalties for failure to pay TDS under Section 194IA are as follows:
- Interest at the rate of 1% per month or part of the month from the due date of TDS to the date of actual payment.
- If the TDS is not deposited within one year from the due date, a penalty equal to the amount of TDS may be levied.
It is important to pay TDS on time to avoid any penalties and interest charges. Additionally, failure to provide the TDS certificate in Form 16B to the seller within the prescribed timelines may also attract penalties.