Meaning

Section 194IA states that any transferee (other than those mentioned in 194LA relating to compulsory acquisition) who is liable to pay to a resident transferor any sum by way of consideration for transfer of immovable property being any land (other than agricultural land) or any building or part of a building shall deduct 1% at the time of credit of such sum in cash or by issue of a cheque or by any other mode whichever is earlier.

Immovable Property

Immovable property shall include land, benefits to arise out of land and other things attached to earth or permanently fastened to anything attached to the earth.

Consideration

Consideration includes

• Club membership fees
• Car parking fees
• Electricity and Water facility fees
• Maintenance Fees
• Advance Fees or
• any other charges of similar nature

Agricultural Land

Agricultural land means an agricultural land in India, not being a land situated in any area referred to section 2(14)(iii)(a),(b).

A land shall not be trated as agricultural land if:

• It is situated within jurisdiction of Mnicipality or Cantonment Board which has a population of not less than 10,000 or,
• It is situated in any area within below given distance measured areailly:

When TDS has to be deducted

TDS shall be deducted at the earlier of the following dates:

• at the time of credit to the account of the payee or
• at the time when actual payment is made

Limit for Deducting TDS

TDS shall be deducted only if the amount of consideration for transfer of immovable property exceeds Rs. 50 lakhs.

Rate of TDS

TDS shall be deducted at 1% of the consideration amount.
No surcharge and Health & Education Cess shall be added to the rates.

Note: TDS shall be deducted at 20% if PAN is not quoted.

TDS in case the Immovable property is partially financed by bank/lender

In case the payment is partially financed by a bank or lender, the transferee is required to deduct TDS on the entire consideration amount of the immovable property irrespective of the fact that whether bank is giving finance or not. Since bank is just the finance provider and not the transferee and this section covers the transferee.

TDS in case of other benefits transferred with Immovable Property:

TDS shall be deducted for all the benefits like Car Parking, permananent membership of club, electrical meter etc. included in the consideration since they are part of consideration.

However, if any refundable deposit is maintained , then the same cannot be considered for TDS.

E.g- M purchased a residential house for net considration Rs. 2 Crore which is 80% financed by ICICI Bank. The consideration includes the following:

Towards purchase of immovable property Rs. 1.6 Crore,
Towards car parking Rs. 20 lakhs
Towards electricity and water facility Rs. 20 Lacs

In the above case, M is required to deduct TDS of 1% on Rs. 2 Crores, i.e. Rs. 2 lakhs
Amount payable by bank = 2 crore * 80% ie Rs. 1.6 Crores
Amount payable by M = (Rs. 2 crore * 20%) - 2lakhs = Rs. 38 lakhs.

Fines and Penalties

Case I: TDS is not deducted

1% per month from the date on which TDS is supposed to be deducted until the date on which TDS is actually deducted.

Case II: TDS deducted but TDS is not deposited with the government

1.5% per month from the date on which TDS is deducted to the date of payment to government.

CaseIII:  Delay in submitting Form 26QB

Fine shall be leviable u/s 234E @ Rs. 200 per day.

CaseIV: Delay in submiting statement

Assessing Officer levies penalty which starts from Rs. 10,000 but extends to Rs. 1 lakhs u/s 271H.