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Section 194IA & 194IB| What is Section 194IA & 194IB under Income Tax Act | YES BANK

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Section 194 of the Income Tax Act, 1961 includes various clauses concerning the Tax Deducted at Source (TDS) payments. Under this section, the two sub-sections, 194IA and 1941B are of utmost relevance. These sub-sections include regulations regarding the TDS cuts on rent concerning the payer, as well as the receiver or owner of the property.

Here is all you need to know about Section 194IA and Section 194IB of the Income Tax Act:

What is Section 194IA?

According to Section 194IA, the buyer of an immobile property must deduct TDS at 1% while making the payment to the owner or seller of the property.

Some conditions that apply to the above rule include:

  • TDS cut is made by the buyer and not by the seller.

  • Tax is applicable only for transactions over ₹50 lakhs.

  • The section applies to all properties except for agricultural land.

  • No additional surcharge or cess is pertinent on the 1% TDS.

  • TDS cut made by the buyer must be deposited within 30 days from the end of the month in which the deduction was made.

  • Along with the TDS, the buyer needs to submit Form 26QB with details of PAN of the seller and the buyer. In case the PAN of the seller is not present, the TDS rises to 20%.

  • The buyer must retain the proof of TDS deposition, which is a challan generated when the TDS is submitted. The challan includes details of payment and Corporate Identity Number (CIN).

  • The buyer must provide the TDS challan to the seller in the Form 16B.

  • The TDS certificate is available on the TRACES website.

In case, the seller makes no capital gains from the property, TDS can be claimed by the seller at the time of filing for Income Tax Returns (ITR). For this purpose, the seller would require a certificate by the Assessing Officer stating that no TDS is to be taken from the payments.

Under Section 201, the following penalty will be levied in case of delay in TDS submission:

  • 1% interest/month from the date of scheduled deduction

  • 1.5% interest/month for late submission of TDS to the government from the date of scheduled deduction

Under Section 234E, the below penalty will accrue:

  • ₹200 per day for late filing of TDS statement. The total late charge should be lesser the actual TDS liability.

What is Section 194IB?

According to Section 194IB, Individuals and Hindu Undivided Families (HUFs), not audited under Section 44AB, must deduct TDS on rent paid to the owner.

The following conditions apply to Section 194IB:

  • The rent should be more than ₹50,000 in such case,

  • Rent pertains to land, land with the factory, equipment, plant, furniture, fittings, and building with the factory.

  • The rate of TDS under Section 194IB is 5% if the PAN card of the recipients/owner is available, and 20% if PAN not available.

  • The buyer must collect and provide Form 16C to the owner of the asset/property.

  • If the payment is made on behalf of the government, the TDS is to be submitted the same day. If not, the TDS can be deposited within seven days beginning from the end of the month when TDS was cut.

  • For payment done in March, the TDS must be given before 30 April.

The TDS deduction under this section is made:

  • At the time of credit of rent for the last month of the past year, or during the last month of tenancy, if the asset is not being occupied anymore.

(or)

  • At the time of actual payment through cash, cheque, draft, etc.

You can find more information on the official website of the Income Tax Department. Be careful and file in your taxes timely to avoid complications.

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