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TDS on Sale of Property (194 IA): Points You Need to Know.
- contactgetitdonein
- Dec 5, 2024
- 2 min read
Updated: Dec 9, 2024
TDS on Sale of Property (Section 194-IA):
When buying or selling property in India, it’s important to be aware of the tax implications that govern such transactions. One of the key provisions under the Income Tax Act is Section 194-IA, which requires the buyer to deduct Tax Deducted at Source (TDS) on the sale of immovable property valued at ₹50 lakh or more. This ensures that the government receives a portion of tax at the time of the transaction itself, contributing to tax compliance and transparency.
In this post, we break down Section 194-IA of the Income Tax Act into 10 key points, helping you understand how TDS on the sale of property works and what both buyers and sellers need to know.
Section 194-IA of the Income Tax Act (TDS on Sale of Property): 10 Key Points
Introduction of Section 194-IA:
Introduced in the Finance Act 2013, Section 194-IA mandates the deduction of TDS on the Sale of immovable property (except agricultural land) valued at ₹50 lakh or more.
TDS Rate:
The Buyer is required to deduct 1% TDS on the sale consideration at the time of payment or credit to the seller.
Applicability:
Applies to residential and commercial properties, including both land and buildings, but does not apply to agricultural land.
Threshold Limit:
TDS under this section is applicable only if the sale consideration is ₹50 lakh or more. If the property is sold for less than ₹50 lakh, no TDS is required.
PAN Requirement:
PAN cards of both buyer & seller are mandatory for the TDS process.
If the Seller does not have a PAN, the TDS rate increases to 20%.
Buyer’s Responsibility:
The Buyer is responsible for deducting and depositing the TDS with the government and filing the TDS return (Form 26QB) within 30 days from the end of the month in which the deduction was made.
TDS Certificate (Form 16B):
After depositing the TDS, the Buyer must provide a TDS certificate (Form 16B) to the seller. This serves as proof of tax deduction and deposit.
Payment and Deposit of TDS:
The TDS must be deposited with the Government within 30 days from the end of the month in which the deduction is made.
Impact on the Seller:
The Seller can claim credit for the TDS deducted and deposited by the buyer while filing their Income Tax Return (ITR). This helps in adjusting the TDS against the total tax liability.
Penalties for Non-Compliance:
Failure to deduct or deposit TDS on time can lead to penalties and interest charges under the Income Tax Act.
Conclusion:
Section 194-IA of the Income Tax Act is an essential provision that ensures a seamless and transparent property transaction process by mandating TDS deductions. Whether you’re a buyer or a seller, understanding the TDS requirements and fulfilling your tax obligations can help you avoid penalties and ensure smooth transactions.
Before finalizing any property deal, make sure you have a clear understanding of the TDS obligations and consult with a tax & legal professional to stay compliant with the law.
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