Deduction of tax at source from payment on transfer of certain immovable property^*

[AY 2025-26]

1 Provisions of Section 194-IA:

(1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.

(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property, both, is less than fifty lakh rupees.

Provided that where there is more than one transferor or transferee in respect of any immovable property, then the consideration shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors for transfer of such immovable property. (w.e.f. 01-10-2024)

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.

Explanation — For the purposes of this section,—

(a) "agricultural land" means agricultural land in India, not being a land situated in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;
(aa) “consideration for transfer of any immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property;’

(b) "immovable property" means any land (other than agricultural land) or any building or part of a building.

2 Scope of section 194-IA:

Section 194-IA, provides that any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land) shall deduct an amount equal to one per cent of such sum as income-tax at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of cheque or draft or by any other mode, whichever is earlier.

No deduction shall be made the consideration for the transfer of an immovable property and the stamp duty value of such property, both, is less than fifty lakh rupees.

3 What payment is covered by section 194-IA:

Any sum paid by way of consideration for transfer of any immovable property (other than agricultural land) is covered under section 194-IA, provided the consideration for transfer of an immovable property is not less than Rs. 50 lakhs.

3.1 Agricultural Land: Agricultural land means agricultural lands in India, not being a land situated in any area referred to in section 2(14)(iii)(a)/(b).

A land shall not be treated as Agriculture Land, if:

a)  It is situated within jurisdiction of Municipality or Cantonment Board which has a population of not less than 10,000; or

b)  It is situated in any area within below given distance measured aerially:

3.2 Immovable Property: Immovable property means any land (other than agricultural land) or any building or part of building.

4 Who is the payer:

The payer is any person, being a transferee, responsible for paying (other than the person referred to in section 194-IA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land).

5 Who is the payee:

The payee is resident transferor of any immovable property (other than agricultural land).

6 Conditions to be satisfied for applicability of section 194-IA:

For applicability of section 194-IA following conditions need to be satisfied:

  •   The payer must be any person referred to in Para 4 above.

  •   The payee must be a resident transferor of an immovable property (other than agricultural land).

  •   The payment must be by way of consideration for transfer of any immovable property (other than agricultural land).

  •   The quantum of payment, or stamp duty value of property, must be Rs. 50 lakhs or more.

7 Aggregate of sum paid by all transferees to all transferors

In case there is more than one transferor or transferee in respect of an immovable property, then consideration (for the purpose of deduction of tax at source) shall be the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors. [effective from 01-10-2024]

8 Time of deduction of tax:

Tax shall be deducted at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

9 Rate of TDS:

Tax shall be deducted at the rate of 1%.

10 Effect of non-furnishing of PAN on rate of tax:

Section 206AA, as inserted with effect from 1-4-2010, provides as under:

  •   Every person whose receipts are subject to deduction of tax at source (i.e., the deductee) shall furnish his PAN to the deductor.

  •   If such person does not furnish PAN to the deductor, the deductor will deduct tax at source at higher of the following rates:

(a) the rate prescribed in the Act;

(b) at the rate in force, i.e., the rate mentioned in the Finance Act; or