Section 194IA of the Income Tax Act mandates that tax must be deducted at source (TDS) on the sale of immovable property (excluding agricultural land) when the transaction value exceeds ₹50,00,000. Earlier, TDS was not applicable on property sales, unlike other income sources such as salary, rent, or interest. Now, any person making a payment to a resident seller towards the purchase of immovable property (other than agricultural land) is required to deduct TDS under this section.

If the transaction amount is ₹50,00,000 or less, TDS provisions under this section do not apply.

Applicable TDS Rate:
TDS is to be deducted at 1% of the consideration amount. In the event the seller fails to provide a valid PAN, the TDS rate increases significantly to 20%.

Requirement of TAN:
The buyer does not need to obtain a Tax Deduction and Collection Account Number (TAN) for making deductions under this section.

TDS Payment & Return Filing:
TDS must be deducted either at the time of payment or when the payment is credited to the seller—whichever happens earlier. If an advance is paid, TDS must be deducted at that time. Similarly, in case of payments in installments, TDS must be deducted at each stage of payment.

The deducted tax must be remitted to the Central Government within seven days from the end of the month in which the deduction is made. Payment must be made online using Form 26QB, which serves as both a challan and a return of TDS.

Issuance of TDS Certificate (Form 16B):
The buyer (deductor) is responsible for issuing Form 16B to the seller (deductee) within 15 days from the due date of depositing the tax.

Key Details Required in Form 26QB (Challan-cum-Statement):

• Full name and complete address of the buyer (transferee/payer)
  

• Full name and complete address of the seller (transferor/payee)
  

• Complete address of the property being transferred
  

• Date of agreement or booking
  

• Total sale consideration in rupees
  

• Payment type (lump sum or instalment)
  

• Amount paid or credited
  

• Date of payment or credit
  

• Rate of TDS deducted
  

• Total TDS amount
  

• Date on which TDS was deducted
  

• Date of TDS payment to the government
  

The seller will receive credit for the TDS amount deducted, which will reflect in their Form 26AS and can be claimed while filing their income tax return.

The fields mentioned above must be filled in accurately while completing the challan-cum-statement under Section 194IA. After deducting the applicable TDS, the buyer must also generate Form 16B electronically from the official government portal. This form, which serves as a certificate of tax deducted at source, should then be downloaded and provided to the seller. Form 16B includes crucial information such as the names and addresses of both buyer and seller, their respective PAN details, and a summary of the transaction.

Any individual who deducts tax while making payment to the seller for a property valued at ₹50,00,000 or more must issue the TDS certificate strictly in Form 16B. Older TDS certificate formats should not be used in such cases.

Applicability of Section 194IA:
This section applies to transactions executed on or after 1st June 2013. For instance, if the agreement was signed before 1st June 2013 but the consideration was received afterward, Section 194IA would not be applicable. Similarly, if advance consideration of ₹50,00,000 or more was paid before 1st June 2013 and the agreement was made post that date, the section still does not apply.

Joint Ownership Scenarios:
Where a property is jointly owned, the ₹50,00,000 threshold is determined based on the total value of the property, not per buyer or seller. The number of parties involved does not affect the applicability.
Example: A, B, and C jointly buy a property with shares worth ₹20 lakhs, ₹15 lakhs, and ₹35 lakhs respectively. Although each individual’s share is below ₹50 lakhs, the total exceeds the threshold. Hence, TDS under Section 194IA would be applicable.

Scope of Section 194IA:
This section is applicable to all individuals, including relatives, minors, and senior citizens. However, in cases where no consideration is involved—such as in gifts—Section 194IA does not apply.

For Payments to Non-Residents:
If the seller is a Non-Resident Indian (NRI), Section 194IA does not apply. Instead, Section 195 is applicable, and TDS must be deducted at 20% plus applicable cess. Additionally, if the payment exceeds ₹1 crore, a 10% surcharge applies. The ₹50 lakh limit is not relevant in transactions involving NRIs.

Non-Compliance Consequences:
Failing to comply with these provisions can attract interest and penalties. If tax is not deducted or is deducted short, interest at 1% per month (or part thereof) will be levied from the date it was deductible until it is actually deducted. If the tax is deducted but not deposited, interest at 1.5% per month (or part thereof) will be charged from the date of deduction until payment is made to the government.

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