Section 194IA: An Overview

Section 194IA aims to regulate TDS on the sale of immovable property such as house property, commercial property, or plots, excluding agricultural land. Buyers are required to deduct TDS at a rate of 1% on the total sales consideration if it exceeds Rs. 50 lakhs. The sales consideration is determined based on the amount paid/credited or the stamp duty value—whichever is higher.

• Total Value of Purchase Determines Applicability

One crucial aspect to note is that the total value of the purchase is considered for the applicability of Section 194IA, rather than the respective share of the sellers. Even if a property is jointly purchased by multiple buyers/sellers if the total value exceeds Rs. 50 lakhs, Section 194IA becomes applicable.

• Inclusive Consideration and Incidental Charges

Consideration for TDS includes not only the property’s price, but also various incidental charges related to the transfer. These charges encompass club membership fees, car parking fees, utility fees, maintenance fees, or any charges incidental to the immovable property transfer.

• Timely TDS Deposit and Documentation

Buyers need to deposit the deducted TDS to the government within 30 days from the end of the month in which the deduction is made. This deposit can be facilitated through the online Challan and Form 26QB available on the income tax portal. If the purchase is made in instalments, TDS should be deducted accordingly for each installment.

• The Buyer’s Compliance Responsibility

Buyers must obtain the PAN and Aadhaar details of the seller for TDS deposit. If the seller does not have a PAN, TDS of 20% will be applicable. It is vital for buyers to ensure that the seller’s PAN is operative, as the buyer will be liable for TDS at a higher rate if the PAN is not functional. Additionally, buyers should provide necessary details like contact information and property details when depositing TDS. After depositing TDS, buyers must send the TDS certificate in Form 16B, which can be downloaded from Traces.

• Seller’s Obligations and Documentation

Sellers need to furnish their PAN and Aadhaar details to the buyer and ensure their PAN is active. Furthermore, sellers must verify that the buyer has deposited and filed Form 26QB; otherwise, the seller will not be able to claim the TDS.

• Additional Considerations for Multiple Buyers or Sellers

In cases involving multiple buyers or sellers, each buyer should fill in the Challan and Form 26QB separately for their respective shares of the property.

• Importance of Compliant Transactions

It is important to note that the income tax department receives information on property purchases and sales through the Annual Information Return (AIR) filed by the registrar office. Thus, both buyers and sellers must comply with TDS deduction requirements under Section 194IA to avoid penalties and ensure a transparent and compliant real estate ecosystem.

• Conclusion:

Navigating the complexities of TDS on the purchase and sale of immovable property is essential for buyers and sellers alike. Adhering to the provisions outlined in Section 194IA not only ensures legal compliance but also contributes to a seamless and transparent real estate transaction. By understanding their obligations and fulfilling them in a timely manner, stakeholders can create a compliant framework and foster trust in the real estate sector.