I have seen many people are purchasing property without compliance of TDS. Later they are receiving demand from Income tax department. I have tried my level best to explain the provisions of section 194IA so that you can understand it and pay the TDS on your own.
Deduction of TDS u/s 194IA:
Person responsible for paying consideration for transfer of property to a resident is required to deduct 1% as TDS from the consideration of the property if the consideration paid or payable is equal to or exceeds rs 50 lakh.
Such Tax shall be deducted at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.
Exemption from deducting TDS on property:
No TDS is need to be deducted if:
- the immovable property is an agriculture land in rural area.
- The consideration of property is less than Rs. 50 Lac.
- Seller is a Non-resident. (however this transaction is subject to TDS under section 195)
Note: Although no tax is required to be deducted where consideration is less than Rs. 50 lakhs but when amount of consideration exceeds rs. 50 lakhs then the TDS is to be deducted on the whole amount not only on the amount exceeding rs. 50 lakhs. For example if the sale consideration of property is 75 Lakhs, then buyer is required to deduct tax on 75 Laks, not on only 25 lakh (75-50)
Payment in Installments:
When consideration is paid in installments, Tax shall be deducted on installment amount
If more than One Buyer or Seller:
For application of Section 194-IA total value of the property will be considered, not the respective share of buyer and seller. E.g Property purchased by two buyer / seller and property value is 60 Lakhs, So sale consideration respective share of buyer / seller is 30 Lakhs each (below 50 Lakhs) but as per rule total value of the property will consider, so Section 194-IA is applicable.
Online statement cum challan 26QB is to be filed in by each buyer for unique buyer seller combination for respective share. For example in case of one buyer and two sellers,two forms have to be filled in and for two buyers and two sellers, four forms have to be filled in for respective property shares.
Non Availability of PAN (Section 206AA):
In the absence of Permanent Account Number of deductee the tax deducted at source is @ 20% but practically this situation will not arise. it will make no difference if the amount is 1% or 20% PAN of seller is mandatory in form 26QB and without PAN, 26QB cannot be filled.
Procedure of depositing of TDS deducted u/s 194IA:
Tax so deducted should be deposited to Government in form 26QB within a period of thirty days from the end of the month in which the deduction is made. Payment can be done through e-tax Payment option (Net banking) or through any of the authorized bank branches.
In addition to above the purchaser is required to furnish a certificate of deduction of tax at source in Form No.16B to the seller within 15 days from the due date for furnishing the Challan-cum-statement in Form No. 26QB.
Since it is a onetime obligation so there is no requirement of obtaining Tax deduction account number (TAN) to the person who is required to deduct tax in this section and no separate TDS return is to be filed in respect of such deduction.
Consequences of Non Compliance:
If TDS is not deducted at all:
- Interest: @ 1% for every month or part of a month on the amount of such tax from the date on which such TDS was deductible to the date on which such TDS is deducted.
- Penalty u/s 271C: equal to the tax amount.
If TDS has deducted but not deposited:
- Interest: @ 1.5% for every month or part of a month on the amount of such TDS from the date on which such TDS was deducted to the date on which such TDS is actually paid.
- Penalty u/s 221: equal to the tax amount.
- Prosecution u/s 276B: Rigorous imprisonment from 3 months to 7 years if tax is deducted but not paid.
Late fee on default in furnishing statement of TDS (26QB): AS per section 234E deductor will be liable to pay by way of fee of Rs 200 per day till the failure to file TDS statement continues. However total fee cannot exceed the amount of TDS deductible for which statement was required to be filed.
Penalty for non filing of statement of TDS (26QB): As section 271H which provides that a deductor shall pay penalty of minimum Rs 10,000/- to Rs 1 lakh for not filing the TDS statement within one year from the specified date within which he was supposed to file the statement. Penalty under section 271H will be in addition to late filing fees prescribed under section 234E. It may be levied on deductor by the assessing officer.