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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 situated in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;
(aa) “consideration for transfer of any immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property;]
(c) “immovable property” means any land (other than agricultural land) or any building or part of a building.
The section is applicable w.e.f. 1.6.2013 under which the ‘immovable property’ was acquired before 1.6.2013 but any instalment has been paid on or after 1.6.2013 and TDS will have to be deducted by the transferee as according to the conditions of the section @ 1% of the consideration 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.
Who is responsible and when to deduct the TDS as per section 194-IA?
Any person, being a transferee responsible for paying (other than the person referred to in section 194IA) to a resident transferor a sum of consideration for the transfer of any immovable property (other than agricultural land), is liable to deduct tax at source under this section. The section clearly states that it is not applicable in case of Non-Resident seller/Transferor.
Tax shall be deducted at the rate of 1% (0.75% w.e.f. 14.05.2020 to 31.03.2021) of the consideration equal to or more then Rs. 50,00,000 without getting any effect of surcharge and Health & Education Cess i.e. on the basic rate. But if PAN is not quoted then in all cases the rate will be of 20% of the consideration.
In case of failure of either TDS deduction or depositing of the deducted TDS to the Government account, in both the cases the transferee shall be liable for penalty and interest thereon.
Time Limits and Procedure of depositing TDS and Issue of TDS Certificate:
Any amount deducted as TDS shall be deposited online to the credit of government within 30days 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 and the challan of the same will be available on TIN NSDL website.
CERTAIN ARGUMENTS REGARDING THE SECTION.
Immovable Property is partly financed by Bank/Lender.
Irrespective of that the amount is financed by bank or lender the liability of TDS deduction will be of the transferee and not of the financer.
Applicability of the provison in case of transfer of Share in a society resulting in transfer of rights in the property.
As the transfer of the shares in the society effectively results in transfer of immovable property and such transfer for a consideration shall be interpreted and all the provisions of section 194IA are applicable.
Purchase of property in auction by a bank or financial institution pursuant to default in payment of loan by the owner of the property
Under provisions of income tax act, such auction sale, the default borrower shall be liable to pay capital gain tax on sale of the property. Therefore the provisons of section 194-IA for deduction of tax at source shall be applicable.
ONE SELLER AND MULTIPLE BUYER:
The law cannot be interpreted and applied differently for the same transaction, if carried out in different ways. The point to be made is that, the law cannot be read as that in case of four separate purchase deeds for four persons separately, section 194-IA was not applicable, and in case of a single purchase deed for four persons section 194-IA will be applicable.
ONE BUYER MULTIPLE SELLER:
In case of more than one seller and one purchaser then if the share of the seller in consideration is below the threshold limit then the provisions of this section are not applicable.
PAYMENT IN INSTALLMENTS:
If the amount of consideration is paid by the transferee in installments then the liability of deducting TDS is applicable at the time of payment of the installment to the seller.
It is to be noted that the Supreme Court has in the case of H. H. Sri Rama Verma v CIT (1990) 187 ITR 308 has held that the word “sum” refers to the amount of money paid taking the above analogy in consideration it could be argued that any payment for consideration to the seller in any form other than through a sum of money should not be liable for the applicability of section 194-IA.