Section 194IA of Income Tax Act - TDS on Purchase of Immovable Property

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Section 194IA of Income Tax Act - TDS on Purchase of Immovable Property

Individuals need to pay property tax on the purchase of a new apartment, building, commercial building, and more. The tax is also known as house tax. Municipal authorities and corporations on real estate owners impose it.

Section 194IA of the Income Tax Act deals with the deduction of TDS on the purchase of immovable property.

The goal of imposing section 194IA is compliance with income tax and preventing property tax evasion. In this guide, we will understand in detail section 194IA of the Income Tax Act.

What is Section 194IA of Income Tax Act?

Section 194IA of the Income Tax Act states the deduction of TDS on the purchase of immovable property, such as commercial or residential property, at the time of transaction.

If the immovable property is worth more than ₹50 lakh, then a buyer is required to deduct the TDS and pay 1% of the transaction cost to the authorities.

However, there are particular prerequisites or requirements under the 194IA TDS section.

Requirements of Income Tax Section 194IA

Some of the critical requirements of section 194IA.

  • The buyer, not the seller, should do the TDS deduction of immovable property.

  • If the transaction of the immovable property is less than ₹50 lakhs, then TDS is not applicable as per Section 194IA.

  • The applicable TDS rate is 1% of the total or actual sale amount, which the buyer needs to deduct.

  • If the total amount is paid in instalments then the TDS needs to be deducted on every instalment payment.

  • The buyer needs the seller's PAN to make the TDS payment. If the PAN is not provided, TDS is deducted at 20%. The PAN for buyers is also mandatory.

  • A buyer does not need to have a TAN (Tax Deduction Account Number) to submit TDS to the government.

  • The TDS is calculated on the total amount of sale, not only on the sum above ₹50 lakh. For example, if a property is sold for ₹70 lakh, then the TDS will be calculated at ₹70 lakh.

  • From September 2019, charges for payment for car parking, maintenance, club membership, electricity, etc come under the "consideration for immovable property". It means such charges included in the property total are also taxable.

  • TDS for immovable property must be paid by filing Form 26QB within 30 days from the end of the month when the TDS was deducted.

  • After making a TDS payment, the buyer also needs to furnish the TDS certificate in Form 16B to the seller.

Section 194IA of Income Tax Act Example

Person XYZ has purchased an immovable property worth ₹80 lakh from ABC. As per section 194IA, 1% of TDS is applicable on the total sale amount, which is ₹80 Lakh. The person XYZ needs to deduct the TDS amount at the time of the transaction to ABC.

  • TDS amount = ₹80,00,000 * 1%

  • TDS amount = ₹80,000

  • The net amount payable to ABC = ₹80,00,000 - ₹80,000 = ₹79,20,000

  • TDS amount of ₹80,000 needs to be deposited with the government within the stipulated time frame.

How to File TDS on Immovable Property?

Buyer needs to follow the below-mentioned **Steps to file TDS on immovable property.

Step 1: Go to the official website for e-payment of taxes.

Step 2: Log on to the account.

Step 3: Next, click on the option" TDS on property". Then, click on the Form 26QB.

Step 4: Further select the "TDS on sale of property" as an applicable challan.

Step 5: Fill out the form accurately.

Step 6: After filling out the form, submit it. Once the form is submitted, a notification of submission will appear on the screen.

Step 7: Next, individuals can also make payment online by clicking on the "Submit to the bank" option.

Step 8: Next, make a payment through a net banking facility.

Step 9: Upon successful payment, a TDS challan with details will appear. Please print it out for future reference.

Penalty of Non-payment of TDS

Every year, the registrar or sub-registrar submits the annual information return (AIR) to the income tax division. The AIR contained information about the immovable property purchase, its sale details and more.

  • So, if a buyer does not pay the TDS to the authority, the income tax department will know. The penalty of non payment of TDS may vary depending on the delay of making TDS payment.

  • Late Filing Fees for TDS Return: Under Section 243E of the Income Tax Act, a late filing fee is imposed for not filing returns on time. A fine of ₹200 per day is applicable until you submit Form 26QB.

Interest Penalty: Under section 201(1A), if the TDS amount is not deposited on time, then the individual needs to pay interest. The interest of 1% per month will be applicable from the date TDS was supposed to be deducted to the actual date it was deducted.

  • Additionally, an interest penalty of 1.5% per month will be applicable from the date the TDS was deducted till it was deposited to the government. This is applicable if the TDS is not deposited with the government on time.

  • Penalty under section 271H: If you fail to submit a statement as required by the tax laws, a minimum penalty of ₹10,000 (extending to ₹1 lakh) will be imposed. However, if you submit the TDS with the applicable late fee and interest and also submit the statement within 1 year, the penalty will be waived.

Prosecution: In extreme cases, the income tax department can initiate legal proceedings for not complying with the income tax rules and deadlines. In such cases, a person who is responsible for deducting or collecting TDS can be prosecuted.


The Section 194IA pertains to the deduction of TDS on the sale of immovable property. The threshold limit under this section is ₹50 lakh. For a transaction of more than ₹50 lakhs, TDS needs to be deducted at 1% of the total sale value.

It is the buyer's responsibility to deduct the TDS and pay it to authorities on time. Failing to pay TDS on time can invite severe penalties from the authorities.

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Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

Related Articles

What is the TDS rate on immovable property?

What is the TDS rate on immovable property?


As per the section 194IA, the applicable tax rate on immovable property is 1%.

What happens if I fail to file TDS?


If an individual fails to deposit the TDS payment within the stipulated time, an interest penalty of 1.5% per month will be imposed from the date the TDS was deducted until it is deposited with the government.