All about TDS on sale of immovable property Section 194-IA

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All about Section 194-IA TDS on sale of Immovable property

All about section 194-IA

Section 194-IA apply only if seller is tax resident of India. If Seller is NRI section 195 comes into picture.

1. What is Section 194-IA of the Income Tax Act?

Section 194-IA requires the buyer (transferee) of an immovable property (other than agricultural land) to deduct tax at source (TDS) while making payment to the seller (transferor).

2. What is the applicable TDS rate under Section 194-IA?

The applicable TDS rate is 1% .

3. On which value is TDS to be deducted under Section 194-IA?

TDS is to be deducted on the higher of the sale consideration (the actual transaction value) or the stamp duty value of the immovable property.

4. What types of immovable properties are covered under Section 194-IA?

The section covers any immovable property (other than agricultural land).

5. What is the meaning of 'consideration' under Section 194-IA?

The 'consideration' includes not only the basic sale price but also charges incidental to the transfer, such as club membership fees, car parking fees, electricity/water facility fees, maintenance fees, and advance fees.

6. What is the meaning of 'stamp duty value' in the context of Section 194-IA?

'Stamp duty value' refers to the value determined under the state’s stamp duty laws for the purpose of paying stamp duty on the property transfer.

7. When is TDS required to be deducted under Section 194-IA?

TDS is required to be deducted at the time of crediting the amount to the transferor's account or when the payment is made in cash, cheque, draft, or by any other mode—whichever is earlier.

8. Is TDS applicable if the property value is less than ₹50 lakhs?

No, TDS under Section 194-IA is not applicable if both the consideration and stamp duty value of the immovable property are less than ₹50 lakhs. Here value means value of entire property and not just share of each seller.

9. Does the buyer need to obtain a TAN for deducting TDS under Section 194-IA?

No, the buyer is not required to obtain a TAN to deduct TDS under this section if seller is Tax resident.

10. What happens if there are multiple buyers or sellers involved in the property transaction?

From 1st October 2024, if there are multiple buyers (transferees) or sellers (transferors), Section 194-IA apply only if the aggregate of the amounts paid or payable by all buyers to all sellers exceeds ₹50 lakhs, even if each buyer’s share is below ₹50 lakhs. Means , have to look for property value and not each buyers share.  

11. How does this change affect buyers who share a property?

Previously, if multiple buyers were involved, many avoided TDS because each buyer's share was below ₹50 lakhs, which was against the intent of the law. From 1st October 2024, this loophole has been closed. TDS will be deducted based on the total value of the property, not the individual share of each buyer.

12. Can buyers still avoid TDS if their share is below ₹50 lakhs?

No, with the new rule, TDS cannot be avoided even if a buyer’s share is below ₹50 lakhs. The total consideration of the property is what matters for TDS deduction, not the individual portions.

13. What should the buyer do after deducting TDS under Section 194-IA?

After deducting TDS, the buyer must deposit the TDS with the government within 30 days from the end of the month in which the deduction was made and issue Form 16B (TDS certificate) to the seller.

14. How to deposit TDS under Section 194-IA?

The process to deposit TDS is fully online. The buyer must:

  1. Log in to the Income Tax e-filing portal here using their PAN.
  2. Fill in Form 26QB with the necessary details of the property transaction and make the TDS payment online.

15. How to issue Form 16B to the seller?

After 2-3 days of making the TDS payment:

  1. Create an account on the TRACES portal for taxpayers here.
  2. Log in and place a request for Form 16B, which is the TDS certificate, and provide it to the seller.

16. Is there any penalty for late deposit of the TDS deducted?

Yes, a penalty of ₹200 per day is applicable for the late filing of Form 26QB, along with interest at the rate of 1.5% per month on the TDS amount until it is deposited.

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