All about TDS on sale of Immovable Property

Section 194-IA of the Income Tax casts a responsibility on the buyer of Immovable Property to deduct TDS on payments made in respect of purchase of any Immovable property of an amount exceeding Rs.50 lakhs. 

First let us look at Section 194-IA of the Income Tax Act which reads as : 

Payment on transfer of certain immovable property other than agricultural land.

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.

Explanation.—For the purposes of this section,—

(a) "agricultural land" means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;

54[(aa) "consideration for transfer of any immovable property" shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property;]

(b) "immovable property" means any land (other than agricultural land) or any building or part of a building.

Thus as per above section following points emerge : 

1. The transfer of immovable property should be other than any agriculture land. However the agriculture land which falls under the definition of Urban land i.e. within the presecribed municipal limits will come under this perview and TDS has to be deducted on purchase of that land. 

2. The purchaser has to deduct tax @ 1% on the sale consideration paid to seller at the time of payment. 

3. The Immovable Property refers to all land and buildings other than the agriculture land. 

4. The buyer and seller both should have PAN no. There is no necessity of having TAN no. for this deduction as this is a one time deduction. 

Procedure to be followed after tax deduction on Sale of Immovable Property

1. The buyer after deduction tax at source has to fill online Form no. 26QB at www.tin-nsdl.com and after filling in the required information as per the form has the option of paying tax immediately (through e-payment option) Or make the payment subsequently through e-tax payment option (net-banking account) or by visiting any of the authorized Bank branches. However, such bank branches will make e-payment without digitization of any challan. The bank will get the challan details from the online form filled on TIN website (www.tin-nsdl.com). 

 

2. After successfully filing Form 26QB, the deductor i.e. buyer has to generate form 16B from the official TDS website i.e. www.tdscpc.gov.in. The same  can be done after registering the buyer as a taxpayer with PAN. 

 

3.The payment of tax (i.e. filling of Form 26QB) should be done within 7 days from the end of the month in which deduction of tax has been done. For example, the payment to seller has been made on 25th Jan. then the TDS has to be deposited up to 7th Feb. alongwith online filing of Form 26QB.  

4. In case of joint ownership of property, the procedure has to be followed by each buyer i.e. if there are two buyers then two Form 26QB have to be filed. 

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