Section 194LA contains provisions relating to TDS on compensation paid in respect of compulsory acquisition of immovable property.

The government can acquire rights in any immovable property without the willing consent of its owner or occupant in the interest of the public.
This process is referred to as compulsory acquisition where the government is obligated to compensate the owner of the immovable property for the acquisition. During the payment of such compensation/consideration, the government is required to withhold tax under section 194LA.

Any person who is responsible for paying any sum to a resident

on account of compulsory acquisition of immovable property would be required to deduct tax under this section.

Tax will be deducted at the rate of 10% on the consideration paid during compulsory acquisition.
In cases where the payee does not furnish his/her PAN, Tax is deducted at the rate of 20%.
No surcharge or cess shall be added to the rate mentioned above. Tax is deducted at a flat rate of 10%/ 20% as the case maybe.

No tax needs to be deducted if the aggregate amount of compensation/ consideration paid does not exceed Rs. 2,50,000 during the financial year.

Tax shall be deducted at the time of payment of such compensation/ consideration.

No tax will be deducted in the following cases:

When the amount of payment or the aggregate amount of payments made to a resident does not exceed Rs.2,50,000 during the financial year.
Where the payment is made in respect of any award or agreement which has been exempted from levy of income-tax under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

FAQ’s on TDS under section 194LA

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