To keep a check on the rapid growth of corruption and black money in the immovable property business, the Indian government has announced a property law under the section 194IA of Income Tax Act, where, the buyer of a property should deduct tax at source. He or she should calculate the taxable amount while paying the retailer for his property.
TDS 194ia on Property Purchase
The properties that are covered under the section 194IA of Income Tax Act are commercial, residential property and land. Such properties require the property owner to subtract 1% of the tax levied on the transaction when it is more than fifty lakhs. Agricultural lands hold no such conditions and are not covered under the 194ia Section of the income tax act.
Section 194IA under Income Tax Act is effective since June 1st, 2013. It states that any individual, being a recipient is accountable for paying to the transferrer any amount under the consideration for transferring of any immovable asset (except agricultural land) will deduct a sum that is equivalent to 1 % of the amount income-tax at the time of credit. Such amount is to be transferred to the account of the seller at the time executing the deed in the form of a cheque, cash, online or demand draft, whichever is former.
No tax will be deducted in the event of consideration amount for the transfer of immovable property is below fifty lakh rupees.
How Is TDS Deducted And How Can One Pay It?
The property buyer is liable to deduct the TDS 194iaon Property Purchase during the implementation of the conveyance deed or during an advance payment before full execution.
- 1st the purchases should deposit the exact amount of TDS within thirty days from the month end (during which the tax is deducted).
- The TDS amount should be deposited to the central government’s credit.
- The process of TDS payment requires the following
- Filling up the form and challan ’26 Q B”
- In case the property has multiple buyer or seller, they should fill up individual forms of 26QB along with their name, addresses and personal details.
The Details Required For TDS Payment under 194ia
The owner has to cooperate with the process and requirements of a TDS filing and submitting the amount to the government. Here are the important steps required for paying the TDS amount:
- We are all liable for TDS payment and concerning that we obtain a TAN number (tax deduction account number). For TDS on properties (or other immovable assets), the owner does not require a TAN number but details such as name, PAN number, address, email id and phone number of bother seller and buyer are necessary for filling up form 26QB.
- Other necessary details such as the full address of the property, complete value of consideration, agreement date of the property and payment date are required to fill up the 26QB form.
- The seller must have all their information accurately placed on the PAN card else, they will not be benefitted from the tax credit deducted by the owner. The credits are supposed to be transferred based on the details provided in the PAN card for filing form 26QB.
- TDS 194ia is paid by both offline and online methods. The offline method includes submitting the filled draft to an authorized bank. On submission, the bank will upload the individual’s details on the departmental website of Income Tax.
- After the TDS amount gets credited to the central government, the owner has to possess a copy of the TDS certificate (16B form) from Income Tax department websites and process it to the vender within the next fifteen days.
Lower Deduction or Nil Deduction of TDS Section 194ia of Income Tax Act
In some cases, under the TDS provision, the recipient can approach the office of the income tax department to issue of a TDS certificate, so that the provider can deduct tax at a lesser rate or nil rate. In other cases, the recipient can simply produce a declaration form for nil TDS. But, as for TDS on immovable property, there are no such provisions. In these instances, the purchaser should go for a mandatory tax deduction right at the source, where the amount surpasses fifty lakhs rupees.
Conditions to be Fulfilled for the Application of Section 194-IA:
- The payer or the transferee is accountable for paying to an occupant any amount that was previously contracted under the consideration of transferring an immovable property.
- The payee or recipient must be an inhabitant transferor of the immovable property (not applicable for agricultural land).
- The payment must fall in terms under the consideration for transferring an immovable property (other than agricultural land).
- The amount of payment must be fifty lakhs or more.
