Though it’s not new, but you should know, w.e.f. June 1, 2013 a new section 194IA has been introduced where 1% Tax Deducted at Source or TDS will be levied on sale/transfer of immovable property (other than agricultural land) exceeds Rs 50 lakhs. Here the buyer of the property needs to deduct the said TDS before making the payment to the seller.

Now re-read the last line of the para above. Ok! Let me repeat it for you “Here the buyer of the property needs to deduct the said TDS BEFORE MAKING THE PAYMENT to the seller.

As per the rule, Tax deducted (TDS) from payments made to seller shall be deposited to the government treasury within 7 days from the end of the month of deduction.  For example: if Rs. 55,000 tax was deducted on June 25, 2015, then the same shall be deposited with the government account till July 7, 2015. But many a time it has been observed that buyer of the property has missed to deduct the TDS at the time of payment to seller or made delay in deposit of such tax which is required to be done as explained above.

For those who missed to deduct the tax, get suddenly realise sometime and try to make the payment either from their pockets or with a mutual talk with the seller to reimburse later. But will these save from any consequences further?

What penalties or interest applicable if there is a late in TDS payment?

In a move to penalise late payers of TDS, the CPC TDS has started issuing intimation u/s 200A of the Income Tax Act’1961 to the deductors u/s 194IA i.e the buyers of property who have paid TDS U/s 194IA late. The CPC TDS is not only charging interest u/s 201, but also late fee u/s 234E of the Act.

In case of where the TDS is not paid to the Govt. account by the due date then under section 201 of IT Act 1961 interest will be levied and the deduct or (buyer of the property) is to be deemed as an assessee in default for failure to pay or for late payment of any TDS including TDS on immovable property.

There could be two scenarios;
a) If tax deducted is not deposited by the 7th of next month of the month of deduction, but is paid at a later date
b) If tax is not deducted at all

In first scenario where tax is not deposited by due date, interest at 1.5% for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

In the second scenario, if tax is not deducted at all then interest at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted.

Let’s understand this with an example: If Rs. 55,000 tax was deducted on June 25, 2015, which required to be deposited with the government account till July 7, 2015, but if the same is paid on August 7, 2015 then interest calculations will be as follows:

Here number of months of default is 3, because part of June will be counted 1, full July month another 1 & part of August another 1 making a total of 3 months of default.

Interest Rate: 1.5%×3=4.5% then Amount of Interest: Rs. 55,000×(3×1.5%)= Rs. 2,475

Late Fee Applicable u/s 234E

In addition to above interests, a late fee of Rs. 200 per day u/s 234E will be levied subject to the amount of tax is to be levied for late filing of TDS statement i.e. form 26QB. Since form 26QB is treated as a statement (which generates TDS certficate as form 16B) prescribed u/s 200(3), therefore late filing of the same will attract late fee u/s 234E of Rs. 200/-per day.

Now how the late fee amount is arrired? Let refer above example, if Rs. 55,000 tax was deducted on June 25, 2015, which requires to be deposited on or before July 7, 2015. . But if the same is paid say by August 7, 2015 then, late fee will be calculated as follows:

No. of days from July 8, 2015 to August 7, 2015 = 32 days

Late fee= 32× Rs. 200= Rs. 6,400 or Rs. 55,000 (amount of tax) whichever is lower i.e. Rs. 6,400

How to make payment of such demand rasied by IT department

Under e-Payment option of taxes of NSDL, a link has been given as Demand Payment i.e. Demand Payment for TDS on Property which is a facility to make payment of demand raised by CPC-TDS against TDS on Sale of Property.

E-Tax_Payment_Demand_us_194IA

For this, all you need is PAN of Transferee/Buyer, PAN of Transferor/Seller, demand Acknowledgement number. Enter these details and selection relevant assessment year and proceed for payment of demand amount.

E-Tax_Payment_Demand_Payment_us_194IA

Have you received any such demand notice? or still waiting to deposit tax or haven’t even deducted tax from the payment(s) made to seller of the property. Don’t do any mistake before any interest or late fee amount getting pile-up to pay later.

Consequences of Delay/Non-Payment of TDS on Purchase of Immovable Property u/s 194IA

2 thoughts on “Consequences of Delay/Non-Payment of TDS on Purchase of Immovable Property u/s 194IA

  • September 4, 2015 at 3:46 PM
    Permalink

    i have purchase the Flat of 55 lakhs, my seller don’t want to pay any TDS.

    What should i do in such case?

    Reply
    • October 1, 2015 at 8:00 PM
      Permalink

      Hi Dev,

      You will have to follow rules & law. Or ask seller to get no TDS deduction certificate from his assessing officer. In absence of that you will have to deduct tax else look for other house property.

      Reply

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