194 IA Governs the provisions of TDS to be deducted on any immovable property transfer.
APPLICABILITY:
A person who is purchasing any immovable property (other than agricultural land) from a resident needs to deduct TDS at the rate of 1%.
There is no need to deduct TDS If the property value is less than Rs. 50 lakhs.
EXCEPTION:
- In case of 194LA regarding compulsory acquisition, provision of this section 194IA is not applicable.
- If the seller is non-resident Indian or NRI then TDS is to be deducted under section 195 on basis of capital gains and not under this section.
- For properties which are under construction, TDS will be deducted only on installments paid on or after 1st June, 2013.
TIME OF DEDUCTION:
Time when tax deducted is to be made is at the time of credit of such amount to the account of the payee or at the time of payment whichever is earlier. The date of registration, agreement or contract is not relevant to decide the time of payment of TDS.
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When the purchase price of the property exceeds rupees. The TDS will then be deducted from the first installment itself and for all installments. The buyer should not wait for the aggregate instalment amounts to exceed Rs. 50 lakh. It is incorrect to assume that TDS is to be deducted from final instalment or when amount exceeds Rs. 50 lakhs.
If the purchaser has taken bank loan and the bank pays directly to the seller in this case also TDS needs to be deducted on date of such payment to the seller.
In such case, it should be considered that the amount paid by bank is after tds and tds to be paid. For Example: – A bank pays Rs. 400000/- to the seller, so we should consider this as payment after TDS and so the gross payment will be 400000/.99 = 404040.40/- So the purchaser has to pay Rs. 4040 as TDS.
DUE DATE OF TDS PAYMENT AND FORM 26QB
The deductor that is person buying property has to file form 26QB which is a Challan cum declaration statement within 30 days from the end of the month in which payment is made. It is not possible to file a separate TDS return for such deductions. Form 26QB must be submitted online.
OTHER NOTES
• TDS is deducted for each installment payment and you must submit a separate Form 26QB for each deduction.
• Form 26QB is submitted for a combination of one buyer and one seller. As with one buyer and two sellers, if you have two buyers and two sellers, you will submit four forms 26QB (two forms for each buyer) for each deduction.
• You do not need to obtain a tax credit account number (TAN) for those who are required to take a tax credit in this section. Only the buyer’s PAN minus TDS is required to submit Form 26QB.