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194-IA: PAYMENT ON TRANSFER OF CERTAIN IMMOVABLE PROPERTY OTHER THAN AGRICULTURAL LAND

-MEERA C.K


Provisions of Section 194 IA has been inserted, in order to restraint the flow of black money in India and to trace out the transfer of immovable property and to put it in the tax net. The provisions of this section require all transferees responsible for paying sale consideration for transfer of immovable property(other than agricultural land) to a Resident transferor to deduct TDS at the rate of 1%, if the value exceeds Rs.50 lakh. This provision came into effect from June, 2013.

The deduction shall be made at the time of credit of such sum either partially or in total to the account of the transferor or at the time of actual payment of such sum, in any mode, whichever is earlier. For the purpose of this section-


Ø “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.

Ø The requirement for obtaining Tax deduction Account Number (TAN) is not applicable in the case of a person deducting tax under this section.

Ø The provisions of this section is not applicable to a transferee on compulsory acquisition of immovable property which is covered under section 194LA.

Ø Consideration for transfer of any immovable property includes all charges incidental to transfer of the immovable property (club membership fee, car parking fee, maintenance fee etc.).

Ø Time and mode of remitting TDS under section 194-IA to the credit of Central Government through challan-cum-statement and issue of TDS certificate are specified under Rule 30, 31A and 31 of Income Tax Rules.

Ø TDS of 1% under section 194 –IA is only applicable for resident Indian sellers. Tax shall be deducted u/s 195,if seller is NRI.


There are a number of FAQs relating to the provisions of this section-

1) Whether tax u/s 194IA is to be deducted even if the transaction take place before 1st June, 2013 and payment made after 1st June, 2013?

If credit to the account of transferor has been made before 1st June, 2013, then the provisions of this section will not apply, even if the payment has been made after 1stJune, 2013. Note that TDS liability is for credit or making payment, whichever is earlier, for transfer of property after the notified date.

2) Whether the threshold limit is for a single transaction or in an aggregate value of transactions made during the year?

There may be contradictory opinion on this case. In the case of Shiv ShakthiBuilders & Developers Vs ITO(ITAT Delhi) dated 20th June, 2019, the assessee purchased three properties on three different dates from the same person for Rs.1.32 crore in piecemeal basis of Rs.44 lakhs for each plot. But TDS not effected u/s 194-IA. The decision was in favour of the assessee, on the ground that the value mentioned in each sale deed executed on three different dates is less than the threshold limit of Rs.50 lakhs.

3) Whether section 194IA is applicable on total value of the immovable property or the respective share of buyer or seller?

In the case ofPradeep Kumar Soni, New Delhi Vs ITO, Faridabad decided on 10th December, 2018, four different transferees purchased a plot for Rs. 1.5 crores. The share of each transferee comes to Rs. 37.50 lakhs, so no TDS was deducted u/s 194 IA. The AO issued a single notice for non-deduction of TDS. However, the decision was in the favour of the assessee on the ground that the share of each transferee does not exceed the threshold limit.

4) Whether tax has to be deducted, if it is paid in instalments?

The transferee or payer is required to deduct tax even if payment is made in instalments,and tax to be deducted on payment of each instalments.


Conclusion:

After the introduction of section 194-IA, taxing authority is getting regular information of the high value transactions in the Real estate sector. Flow of information is made easy as the registering authority is legally bound to make sure the compliance U/S 194IA. But there are several loose ends regarding the provisions of 194-IA, especially in the case of the threshold limit of Rs.50 lakhs and its applicability, which need to considered carefully. However, the provisions has avoided unnecessary tax burdens for small parties.



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