TDS Provisions for immovable property

The TDS provisions relating to deduction of tax at source is contained in sections 194IA & 194LA of the Income Tax Act,1961. Let us discuss the provisions in detail :-

Section 194A : TDS on payment on transfer of certain immovable property :-

Deductor : Any purchaser (other than a person referred to in section 194LA)

Deductee : Any seller being a resident

Time of deduction : At the time of credit or payment, whichever is earlier.

Rate of TDS : 1% of the total consideration for transfer of immovable property

Important points to be noted :-

• Every person is liable to deduct TDS @1% on payment made for purchase of immovable property to a person resident in India, except for :-
• Rural agricultural land (which is not coming in the definition of capital asset), and
• Where the sale consideration for the property is less than 50 lakhs

• If any immovable property is purchased from a non-resident person for any value, no TDS is required to be deducted under this section. However, TDS shall be deducted under section 195.

• Every person who is purchasing property of 50 lakhs or more will have to deduct TDS @1% of the payments made to the seller.

• In the case of property whose sale price is 50 lakhs or more and in the event of part payment is being made for the purchase, then such TDS would be required to be deducted on every part payment of consideration and not at the time of final tranche of payment.

• If the sellers jointly owns a property and sells for a total consideration of 50laks or more, then section 194IA is attracted even if each co-owner’s consideration is less than 50 lakhs.

• It is not necessary that the land or building should be situated in India. If any person is purchasing property outside India from a person resident in India, he liable to deduct tax at source on sale consideration @1%.

• In case section 194IA is attracted then the purchaser is not required to obtain TAN, i.e. Tax Deduction & Collection Account Number, i.e. section 203A is not applicable.

• In case the seller does not have a PAN, then instead of 1%, TDS will be applicable@20%, because of section 206AA of the Income Tax Act, 1961.

• TDS is required to be deducted irrespective of the fact that immovable property is held as capital asset or stock-in-trade by buyer and seller.

• In case immovable property (other than agricultural land which is not a capital asset) is acquired under any law in force, the provisions of section 194LA shall apply and the provisions of section 194IA is not applicable.

Section 194LA : Payment of compensation on compulsory acquisition of any immovable property (other than agricultural land) :-

Deductor : Any person

Deductee : Any resident

Time of deduction :At the time of payment

Rate of TDS : 10%

Important points to be noted :-

• No TDS where amount does not exceed 2,50,000 during a financial year.

• No TDS where 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.

• As per the circular, the compensation received under the the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, for agricultural land and non-agricultural land is exempt from tax. Therefore, if any land or building is acquired under the said Act, then no capital gains shall arise. Hence, there will be no TDS on any award/ compensation awarded under the said Act.

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You May Also refer : Analysis of all change proposed in TDS provisions to read about changes related to TDS on Immovable Property.

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