Section 194-IA Explained

Section 194-IA of the Income Tax Act, 1961, was introduced in 2013 to bring the sale of immovable property within the ambit of TDS provisions. As per this section, any person who purchases immovable property from an Indian resident is required to deduct TDS at the rate of 1% of the consideration paid or payable to the resident seller where sale consideration is more than Rs. 50 Lakhs . The aim of this provision is to ensure that tax on the sale of immovable property is collected at the time of transaction itself, rather than waiting for the end of the financial year.

• 1. Agricultural Land

TDS on property under section 194-IA is not applicable in the case of agricultural land. As per the Income Tax Act, agricultural land is exempted from the purview of TDS on property.

• 2. When consideration for transfer of immovable property or Stamp Duty Value of such property is not more than Rs. 50 Lakh

If the consideration for transfer of immovable property or the stamp duty value of such property is not more than Rs. 50 lakh, TDS on property under section 194-IA is not applicable. This exemption is provided to protect small transactions from the burden of TDS.

• 3. More than one buyer with multiple seller where share of individual seller’s consideration is not crossing Rs.50 Lakh

If there are more than one buyer and multiple sellers involved in a property transaction, TDS on property under section 194-IA is not applicable if the share of individual seller’s consideration is not crossing Rs. 50 lakh. This exemption is given to avoid the burden of TDS on small transactions.

• 4. In case of redevelopment scheme where stamp duty value of property less monetary consideration paid is not more than Rs. 50 Lakh

TDS on property under section 194-IA is not applicable in case of a redevelopment scheme where the stamp duty value of the property less monetary consideration paid is not more than Rs. 50 lakh. This exemption is given to promote the redevelopment of old and dilapidated buildings.

• 5. When payee is State Government or Central Government or RBI

As per section 196 of the Income Tax Act, TDS provisions are not applicable to the State Government, Central Government, or the Reserve Bank of India. Therefore, when the payee is any of these entities, TDS on property under section 194-IA is not applicable.                                                                                                  

• 6. When income of payee is unconditionally exempt under section 10 & who are not required to file his Income Tax Return

If the income of the payee is unconditionally exempt under section 10 of the Income Tax Act and the payee is not required to file an income tax return, TDS on property under section 194-IA is not applicable. This exemption is provided to avoid the burden of TDS on such individuals.

In conclusion, Section 194-IA of the Income Tax Act, 1961, is an important provision for TDS on property transactions. While the general rule is that TDS is to be deducted at the rate of 1% of the consideration paid or payable for the property, there are several exemptions and exceptions to this rule. It is important for buyers and sellers of immovable property to be aware of these exemptions and exceptions in order to avoid unnecessary TDS deductions and comply with the applicable tax laws. Seeking professional advice in case of any confusion or ambiguity is always advisable to avoid any future disputes with the tax authorities