Online TDS/TCS return filling and related compliance – (Analysis of Section 194IA)
Introduction: In era where technology as substantially replaced the usage of man-power; our portal provides service where on the basis of raw data our experts will ensure all the TDS and TCS compliance including filling of returns. In this article we will analyze section 194IA of Income Tax Act, 1961 along with relevant illustration.
Which are the persons that are required to deduct TDS under section 194IA?
Any person (transferee/buyer) who is making payment or who is responsible for making payment to any resident (transferor/seller) in reference to consideration on account of sale of any immoveable property (not been an agriculture land) will be liable to deduct TDS under section 194IA of Income Tax Act, 1961.
Which form is to be furnished as TDS return if deduction is under 194IA?
If person has deducted TDS under section 194IA, then such person will be liable to furnish Form 26QB. Such form is to be furnished by deductor and after successful filling such deductor will be required to furnish form 16B to the seller of the property which will describe the amount paid and TDS deducted by the buyer; such will be auto generated; only thing assessee will be required to do is, to request such form after 4-5 days of successful filling of form 26QB.
What is the threshold limit and rate of deduction under section 194IA?
As per section 194IA TDS is required to be deducted only if amount of consideration paid is equal to or exceeding Rs. 50,00,000/-; It shall be noted that this limit is threshold limit that is if the amount is exceeding Rs. 50,00,000/- than in that case person will be required to deduct TDS on entire amount and not only on the amount which is exceeding Rs. 50,00,000/-.
Whether the person whose TDS is deducted under section 194IA will be liable to file return?
In case if person whose TDS is deducted under section 194IA are required to file the return if their total income is exceeding the basis exemption limit which has been specified. Unlike section 194E there is no conditional exemption for the person whose TDS is deducted under section 194IA.
Important Points to be Noted:
- Person who is required to deduct TDS under section 194IA will not be required to obtain TAN.
- If payments are made in installments than TDS is required to be deducted on each installment. Also, checking the applicability of provision aggregate amount is to be considered even though amount is paid in installment.
Can assessee reduce the rate of taxation?
Under section 194IA it has been provided that applicable rate of tax will be 1%, (currently 0.75%) it shall be noted that assessee cannot apply to assessing officer for no TDS or TDS at lower rate under Section 197 by filling form-13.
What will be time when TDS is required to be deducted?
TDS will be required to be deducted at time of payment or crediting account of payee in books of payer whichever is earlier.
What if such amount is credited to suspense account?
In case even if amount is credited to suspense account or account of any name, then in that case it is considered as credited to account of payee and TDS will be required to be deducted at time of such credit.
Illustrations : Mr. J is an Indian resident; he has sold a vacant land during the year financial year 2020-21. He has received Rs. 26,00,000/-from each of two co-buyers of the land. He is of the opinion that TDS will not be applicable as such transaction is not exceeding the limit. Determine whether TDS under section 194IA is applicable?
It shall be noted that provision of deduction of TDS under section 194IA is applicable to payer when he is making payment to any resident person and the payment is exceeding Rs. 50,00,000/-; Also, it is well established position of law that in case of co-owner separate limit is to be considered. In instant case even though total amount of transaction is Rs. 52,00,000/- the consideration paid by each of co-owner is Rs. 26,00,000/-. Therefore, 194IA will not be applicable.
What if Mr. J (seller of property) was Non-resident?
In case Mr. J is non-resident than in that case both the buyer will be required to deduct TDS as required under section 195; as section 194IA is applicable only in case when amount is paid to resident person.
From above it is very clear that who all are the person that are required to deduct TDS and what will be the rate of deduction or what will be the threshold limit for deduction.