Before coming on the main article, let’s understand why there is a need of
invoking such provisions of section 194-IA under income tax act, 1961.
There is a great need and importance of invoking such provisions in income tax
so as to curb the circulation and flow of black money in India. Many Real Estate
dealers cast their transactions in such a way so as to avoid taxation and mostly
transactions are done in cash so as to hide money trail i.e. cash transactions
are easy to hide but the same transactions if any routed through banking
channels ;then there are less possibilities of concealing that
transactions. Morover, there is also a provision that debars the seller to take
consideration in cash exceeding 2,00,000/- INR in respect of such transaction .
Now coming on to main article , let’s discuss the provision
Language of section 194-IA as per Bare act,
(1) Any person, being a transferee, responsible for paying (other than the
person referred to insection 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 203Ashall not apply to a person required to
deduct tax in accordance with the provisions of this section.
Explanation: For the purposes of this section,-
"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;
"immovable property" means any land (other than agricultural land) or any
building or part of a building.
Jest of the abovementioned section
1) Applicability- Applies to all types of person(being transferee) as defined
u/s 2(31) and all resident transferor.
Applies to all types of immovable property except agricultural land.( being
defined in part ‘a’ of Explanation to section 194-IA).
1) Person deducting the tax is not required to obtain TAN no.
2)TDS is required to be made only if consideration exceeds 50 lakhs INR.
2) 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.
3) Rate of TDS:
Tax shall be deducted at the rate of 1%.
4)What if PAN is not furnished by the deductee
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
(c) at the rate of 20 %.
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.
Let’s understand it by way of an example
Example No. 1
Suppose there was an immovable property owned by Pushp Kumar Sahu whose market
value is 5 Crores INR. The said property was sold by Pushp Kumar Sahu toMr.
Uday Kumar Sahuat a consideration of 5.5 Crores, now there is a liability on
Mr. Uday to deduct tax @ 1% of the said consideration i.e. 5,50,000/- and the
same shouldbe paid to the credit of the Central Government within a period of
thirty days from the end of the month in which the deduction is made and shall
be accompanied by a challan-cum-statement inForm No. 26QB.
Note: After filing Challan cum statement 26QB, Deductor requires to issue Form
16B (TDS Certificate) to the deductee.
Example No. 2
Suppose there were three brothers named Pushp, Mohit and Rishab, they are
co-owners of a immovable property. They sold that property to Laxminayaran &
associates ( partnership firm) at a consideration of 1.45 Crores. Now the
question arises that whether the laxminarayan & associates needs to deduct TDS
on such consideration.
Answer isno, as property is owned by three persons , individual consideration
per person does not exceed 50 lakh INR, therefore no requirement for TDS u/s
Reliance can be placed on the judgment passed by the Delhi Bench of the Income
Tax Appellate Tribunal in case of Vinod Soni and others ( Taxpayers)
Written by: Pushp Kumar Sahu