In the Finance Act 2013 a new section was introduced i.e 194IA of the Income Tax Act. This section was introduced to cover the transaction of purchase of the immovable property. In this, the buyer is required to deduct tax while making payment of immovable property if the amount exceeds the specified limit.
When any person buys an immovable property (other than agricultural land) costing INR 50 lakhs or more then TDS is to be deducted at 1% of the purchase price under section 194IA. The following points are also be considered:
Example: Ram has bought land for INR 60 lakhs from Shyam. Since the value of consideration is more than INR 50 Lakhs, Ram must deduct TDS on the entire amount (INR 60 lakhs) and not on exceeding amount (INR 10 lakhs).
As per Finance Act 2019, Purchase consideration 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.
As per Finance Act 2019, Purchase consideration 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.
The tax shall be deducted on the payment of the consideration to the seller. The date of payment shall be earlier of:
Also, If the payment of consideration is via installments then the TDS shall be deducted on payment of each installment. The same applies to the advance payment in case of the purchase of immovable property (other than agricultural land). The amount to the seller shall be paid after the deduction of TDS.
Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)
Residential Status Calculator for Income Tax. Taxability in India depends on residential status. Know your residential status from Resident, NRI, Resident but Not Ordinarily Resident(RNOR)
Parth purchases an immovable property from Suraj for INR 70 lakhs. The payment of consideration is made in the following manner:
| Date of Payment | Nature of Payment | Amount |
| 01/01/2022 | Advance | 10 Lakhs |
| 01/02/2022 | First Installment | 30 Lakhs |
| 01/03/2022 | Second Installment | 30 Lakhs |
In this case, the TDS u/s 194IA shall be deducted at 1% in each case of payment whether it is by way of advance or an installment.
For an instance, the amount paid as an advance on 01/01/2022, the tax of INR 10,000 shall be deducted and a net payment of INR 9,90,000 shall be made to the seller.
In a transaction of sale of immovable property if there are more than 1 buyer and the individual amount of consideration is less than INR 50 lakhs for each buyer, but the aggregate amount of consideration exceeds INR 50 lakhs the transaction shall fall within the ambit of 194IA and also each buyer needs to deduct the tax on the amount paid.
Mr. A and Mr. B buy land in partnership each contributing an amount of INR 45 lakhs.
In the current case though the individual amount paid by both the buyers Mr. A and Mr. B is less than INR 50 lakhs, but the aggregate consideration paid for the land exceeds INR 50 lakhs ( i.e. 90 lakhs). The transaction should be considered as the sale of immovable property u/s 194IA, and tax shall be deducted by both buyers individually.
Similarly in the case of the sale of immovable property, where a transaction with more than one seller and the aggregate value of the transaction of sellers exceeds INR 50 lakhs the transaction shall be included within the ambit of section 194IA and the buyer needs to deduct the tax.
Swapnil and Tarun decided to sell the land co-owned by both of them for a consideration of INR 60 lakhs to Akash. Also, It was decided that the consideration shall be divided on an equal basis between both sellers.
In the current scenario, though the individual consideration received by each seller (i.e INR 30 lakhs) is less than the exemption limit of INR 50 lakhs, but the aggregate consideration received (i.e INR 60 lakhs) exceeds the limit; thus the transaction shall be included within the ambit of 194IA.
In case of more than 1 buyer and seller form 26QB needs to be filed separately for both buyer and seller.
