TDS ON SALE OF IMMOVABLE PROPERTY U/s 194IA
The former finance minister P. Chindambaram while announcing budget 2013-14 introduced TDS on sale of property U/s 194IA. Usually transactions of Immovable property are under valued or under reported. With a view to improving the reporting of such transactions and capital gain taxation Sec 194IA has introduced.
1. Provisions of Section 194-IA
(1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land),
shall, 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 issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.
(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.
(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.
(4) "immovable property" means any land (other than agricultural land) or any building or part of a building.
No deduction shall be made where consideration for the transfer of an immovable property is less than fifty lakh rupees.
2. Payments covered by sec 194-IA
Any sum paid by way of consideration for transfer of any immovable property (other than agricultural land) is covered under section 194-IA, provided the consideration for transfer of an immovable property is not less than Rs. 50 lakhs.
3. Agricultural Land
Agricultural land means agricultural lands in India, not being a land situated in any area referred to in section 2(14)(iii)(a)/(b).
4. Immovable Property
Immovable property means any land (other than agricultural land) or any building or part of building.
5. Who is the payer & payee
The payer may be a resident or non-resident but the payee should be resident transferor.
6. Time of deduction of tax
Tax shall be deducted 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 issue of a cheque or draft or by any other mode, whichever is earlier.
7. Rate of TDS
Tax shall be deducted at the rate of 1%. If Payee does not produce the PAN, TDS as per Sec 206AA ( 20% ) will be attracted.
8. Tax Deduction and Collection Account Number (TDCAN)
Provisions pertaining to Tax Deduction and Collection Account Number, i.e., section 203A, shall not apply to a person deducting tax at source under Section 194-IA.
9. Deposit of tax to the credit of the Central Government
Any sum deducted under section 194-IA shall be paid to the credit of the Central Government within a period of 30 days from the end of the month in which the deduction is made and shall be accompanied by a challan-cum-statement in Form No. 26QB.
10. Certificate/statement for tax deducted at source
Every person responsible for deduction of tax under section 194-IA shall furnish the certificate of deduction of tax at source in Form No. 16B to the payee within fifteen days from the date of furnishing the Challan-cum-statement in Form No. 26QB.
Section 194IA is not applicable if payment is made to Non Resident Indian. Those transactions come under the purview of section 195 of the Income tax Act. Hence, upper limit is not applicable here.
Also, TDS here will be deducted as per rate prescribed chapter XVIIB or 20%+EC+SHEC (whichever is higher) on the sale consideration. Surcharge @ 10% will be applicable if amount paid exceeds rs. 1crore. It is important to consider the DTAA provisions of the relevant country if any.