Deduction of tax at source from payment on transfer of certain immovable property Applicable for the Assessment Year 2014–15 and 2015–16

1 Pro­vi­sions of Sec­tion 194-IA:

(1) Any per­son, being a trans­fer­ee, respon­si­ble for pay­ing (oth­er than the per­son referred to in sec­tion 194LA) to a res­i­dent trans­fer­or any sum by way of con­sid­er­a­tion for trans­fer of any immov­able prop­er­ty (oth­er than agri­cul­tur­al land), shall, 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, deduct an amount equal to one per cent of such sum as income-tax thereon.

(2) No deduc­tion under sub-sec­tion (1) shall be made where the con­sid­er­a­tion for the trans­fer of an immov­able prop­er­ty is less than fifty lakh rupees.

(3) The pro­vi­sions of sec­tion 203A shall not apply to a per­son required to deduct tax in accor­dance with the pro­vi­sions of this section.

Expla­na­tion — For the pur­pos­es of this section,—

(a) “agri­cul­tur­al land” means agri­cul­tur­al land in India, not being a land sit­u­ate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of sec­tion 2;

(b) “immov­able prop­er­ty” means any land (oth­er than agri­cul­tur­al land) or any build­ing or part of a building.

2 Scope of sec­tion 194-IA:

Sec­tion 194-IA, as insert­ed with effect from 1–6‑2013 pro­vides that any per­son, being a trans­fer­ee, respon­si­ble for pay­ing (oth­er than the per­son referred to in sec­tion 194LA) to a res­i­dent trans­fer­or any sum by way of con­sid­er­a­tion for trans­fer of any immov­able prop­er­ty (oth­er than agri­cul­tur­al land) shall deduct an amount equal to one per cent of such sum as income-tax 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 cheque or draft or by any oth­er mode, whichev­er is earlier.

No deduc­tion shall be made where con­sid­er­a­tion for the trans­fer of an immov­able prop­er­ty is less than fifty lakh rupees.

3 What pay­ment is cov­ered by sec­tion 194-IA:

Any sum paid by way of con­sid­er­a­tion for trans­fer of any immov­able prop­er­ty (oth­er than agri­cul­tur­al land) is cov­ered under sec­tion 194-IA, pro­vid­ed the con­sid­er­a­tion for trans­fer of an immov­able prop­er­ty is not less than Rs. 50 lakhs.

3.1 Agri­cul­tur­al Land: Agri­cul­tur­al land means agri­cul­tur­al lands in India, not being a land sit­u­at­ed in any area referred to in sec­tion 2(14)(iii)(a)/(b).

A land shall not be treat­ed as Agri­cul­ture Land, if:

1. a) It is sit­u­at­ed with­in juris­dic­tion of Munic­i­pal­i­ty or Can­ton­ment Board which has a pop­u­la­tion of not less than 10,000; or
2. b) It is sit­u­at­ed in any area with­in below giv­en dis­tance mea­sured aerially:

Pop­u­la­tion of the Municipality	Dis­tance from Munic­i­pal lim­it or Cantonment Board
More than 10,000 but does not exceed 1,00,000	With­in 2 kms.
More than 1,00,000 but does not exceed 10,00,000	With­in 6 kms.
Exceed­ing 10,00,000	With­in 8 kms.

3.2 Immov­able Prop­er­ty: Immov­able prop­er­ty means any land (oth­er than agri­cul­tur­al land) or any build­ing or part of building.

4 Who is the payer:

The pay­er is any per­son, being a trans­fer­ee, respon­si­ble for pay­ing (oth­er than the per­son referred to in sec­tion 194-IA) to a res­i­dent trans­fer­or any sum by way of con­sid­er­a­tion for trans­fer of any immov­able prop­er­ty (oth­er than agri­cul­tur­al land).

5 Who is the payee:

The pay­ee is res­i­dent trans­fer­or of any immov­able prop­er­ty (oth­er than agri­cul­tur­al land).

6 Con­di­tions to be sat­is­fied for applic­a­bil­i­ty of sec­tion 194-IA:

For applic­a­bil­i­ty of sec­tion 194-IA fol­low­ing con­di­tions need to be satisfied:

• The pay­er must be any per­son referred to in Para 4 above.
• The pay­ee must be a res­i­dent trans­fer­or of an immov­able prop­er­ty (oth­er than agri­cul­tur­al land).
• The pay­ment must be by way of con­sid­er­a­tion for trans­fer of any immov­able prop­er­ty (oth­er than agri­cul­tur­al land).
• The quan­tum of pay­ment must be Rs. 50 lakhs or more.

7 Time of deduc­tion of tax:

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.

8 Rate of TDS:

Tax shall be deduct­ed at the rate of 1%.

9 Effect of non-fur­nish­ing of PAN on rate of tax:

Sec­tion 206AA, as insert­ed with effect from 1–4‑2010, pro­vides as under:

• Every per­son whose receipts are sub­ject to deduc­tion of tax at source (i.e., the deductee) shall fur­nish his PAN to the deductor.
• If such per­son does not fur­nish PAN to the deduc­tor, the deduc­tor will deduct tax at source at high­er of the fol­low­ing rates:

(a) the rate pre­scribed in the Act;

(b) at the rate in force, i.e., the rate men­tioned in the Finance Act; or

© at the rate of 20 per cent.

• Where the PAN pro­vid­ed to the deduc­tor is invalid or does not belong to the deductee, it shall be

deemed that the deductee has not fur­nished his PAN to the deduc­tor and above pro­vi­sions shall apply accordingly.

10 Tax Deduc­tion and Col­lec­tion Account Num­ber (TDCAN):

Pro­vi­sions per­tain­ing to Tax Deduc­tion and Col­lec­tion Account Num­ber, i.e., sec­tion 203A, shall not apply to a per­son deduct­ing tax at source under Sec­tion 194-IA.

11 Deposit of tax to the cred­it of the Cen­tral Government:

Any sum deduct­ed under sec­tion 194-IA shall be paid to the cred­it of the Cen­tral Gov­ern­ment with­in a peri­od of sev­en days from the end of the month in which the deduc­tion is made and shall be accom­pa­nied by a chal­lan cum- state­ment in Form No. 26QB.

The sum so deduct­ed shall be deposit­ed to the cred­it of the Cen­tral Gov­ern­ment by remit­ting it elec­tron­i­cal­ly to the Reserve Bank of India or the State Bank of India or to any autho­rised bank.

12 Certificate/statement for tax deduct­ed at source:

Every per­son respon­si­ble for deduc­tion of tax under sec­tion 194-IA shall fur­nish the cer­tifi­cate of deduc­tion of tax at source in Form No. 16B to the pay­ee with­in fif­teen days from the due date for fur­nish­ing the Chal­lan cum- state­ment in Form No. 26QB under Rule 31A after gen­er­at­ing and down­load­ing the same from the web por­tal spec­i­fied by the Direc­tor Gen­er­al of Income-tax (Sys­tem) or the per­son autho­rised by him.

13 Fur­nish­ing of state­ments by tax deduc­tor to department:

Every per­son respon­si­ble for deduc­tion of tax under sec­tion 194-IA shall fur­nish to the Direc­tor Gen­er­al of Income-tax (Sys­tem) or the per­son autho­rised by him a chal­lan-cum-state­ment in Form No. 26QB elec­tron­i­cal­ly with­in sev­en days from the end of the month in which the deduc­tion is made.