List of Exemptions under Section 10 of Income Tax Act
May 7, 2018
Section 194J – TDS on Professional or Technical Services
May 7, 2018
section 194ia

What is Section 194IA

Last Update Date : October 30, 2018

section 194ia

Have you ever heard about the All American Dream? In 1944, President Roosevelt of The United States, defined the All-American dream as, the pursuit of happiness of owning a decent house, a good job, education and health care. This statement also implied if you worked hard and followed the rules, then the government should provide basic facilities, financial security, education, etc. This has been ingrained into one’s head because one wants to live as well as or better than the others. Also, It’s within one’s ability. However sometimes, a person may not be able to handle his/her properties, so he/she may sell their properties. But such transaction are liable for tax under section 194IA of Income Tax Act, India.  Let us understand what kind of properties are included under this section and the deductions allowed to taxpayers.

Scope of Section 194IA

Under section 194IA of Income Tax Act, 1961, with effect to 1-6-2013, 1% tax deductible on amount payable to the transferor by the transferee in consideration to the sale/transfer of an immovable property.

Provisions of Section 194IA

  • Any person being a transferee responsible for paying to a resident transfer any sum by way of consideration for transfer of any immovable property (Other than agricultural land) shall, at that time of transfer of such sum by cash or cheque or draft or by any other mode, whichever is earlier, on such amount 1% of tax is deducted.
  • No deduction shall be made where the consideration of transfer of an immovable property is less than fifty lakhs.
  • The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

Deduction u/s 194IA

Any amount paid in consideration to the transfer of an immovable property (other than Agricultural land), provided the amount is not less than Rs. 50 Lakhs.

Immovable Property:  Any land (other than agricultural land) or any building or part of building is immovable property.

Agricultural Land:  A land shall not be treated as agricultural land, provided,

  1. It is situated within the jurisdiction of municipality or cantonment board with population not less than 10,000.
  2. It is situated in any area mentioned below covering distance
Size of Population Distance from Municipality or Cantonment Board
10,000-100,000 Within 2 Kms
100,000-10,00,000 Within 4 Kms
More than 10,00,000 Within 6 Kms

Agricultural lands not being situated in any area as referred to section 2(14) (iii)(a)(b).
Payer:  A payer is any person referred to as transferee responsible for paying a sum of amount to the resident transferor in consideration to transfer of an immovable property.
Payee:  A payee is a resident transferor of an immovable property.

Applicability

Conditions to satisfy for the applicability of section 194IA:

  • A payer must be any person as referred above.
  • A payee must be a resident transferor (other than agricultural land)
  • The payment must be in consideration to the transfer of an immovable property.
  • Consideration must be a min of 50 lakhs or more.

Tax Deducted at Source

Time limit of the deduction and Rate of TDS

Tax shall be deducted at time of payment by way of cash or cheque or draft of such amount or at the time of credit of such transaction, whichever is earlier.

Rate of Tax shall be deducted @ 1%.

TDCAN:  Tax Deduction and Collection Amount Number(TDCAN), shall not apply to a person deducting TDS under section 194IA.

Certificate of TDSCertificate of TDS and deposit of TDS to the Govt under this section, refer Form 26QB.

Effects of not Following the Conditions of Deductions and Payments

  • Every person who is subject to deduct TDS shall provide PAN number to the deductor.
  • In case deductee doesn’t provide PAN to the deductor, deductor will deduct TDS at higher of the following:
    1. Rate given under the Act
    2. Rate mentioned in the Finance Act,
    3. Rate @ 20%.
  • In case of the Pan provided by the deductee is false or not valid, then it is assumed that the deductee had not provided the details of PAN.

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