Table of Contents
1. Section 194-IA of the Income Tax Act, 1961
- The person who is buying any immovable property has to deduct tax at the rate of 1% while making payment to the seller.
- TDS under section 194-IA is applicable only when making payment to residents.
2. What do you mean by immovable property for the purpose of TDS under section 194-IA?
- Immovable property means any land other than agricultural land, or building or part of the building.
- Only rural agricultural land is exempt from the provisions of section 194-IA. Transfer of urban agricultural land will attract TDS as per the provisions of section 194-IA.
3. What is the threshold limit for deduction of TDS under section 194-IA?
- No TDS is required to be deducted under section 194-IA if the consideration for the transfer of immovable property is less than Rs. 50 lakhs (excluding GST)
4. What is the rate of tax to be deducted under section 194-IA?
- Tax at the rate of 1% should be deducted on the consideration paid for transfer of immovable property.
5. What do you mean by consideration under section 194-IA of the Income-tax Act?
Consideration means, the amount paid for the transfer of the property and shall include the following,
- Club membership fee
- Car parking fee
- Electricity or water facility fee
- Maintenance fee
- Advance fee
- Any other charges of similar nature that are incidental to transfer the immovable property.
6. What is the point of taxation under section 194-IA?
- Tax has to be deducted at the time of credit of such sum to the account of the transferor (seller) or at the time of payment of such sum to the transferor (seller) whichever is earlier.
7. Circumstances where tax under section 194-IA need not be deducted?
- Transfer of a rural agricultural land.
- Compulsory acquisition of immovable property – because TDS on such transaction is covered under section 194LA.
- Consideration for transfer of immovable property is less than Rs. 50 lakhs.
8. Is it mandatory to obtain tax deduction account number (TAN) to deduct tax under section 194-IA?
- The requirement of obtaining TAN (section 203A) shall not apply to the persons required to deduct tax under section 194-IA. In other words, TAN not necessary for tax deduction under this section.
9. Mr. John, a non-resident sold his building situated at Hyderabad to Mr. Rahul for a consideration of Rs. 70 lakhs. In the given case what is the amount of TDS to be deducted?
- In the given case, Mr. John is a non-resident. Therefore, the provisions of section 194-IA is not applicable.
- TDS is to be deducted under section 195 at 20% (in case of Long term capital gain), 30% (in case of short term capital gain)
- It has to be noted that, if tax is deducted under section 195, surcharge and cess shall be levied, if applicable.