TDS on Compulsory Acquisition of Immovable Property
Introduction
TDS must be deducted under section 194LA at 10% on compensation or enhanced compensation paid to a resident for the compulsory acquisition of immovable property (other than agricultural land).
Key Provisions
- Deductor:Any person making compensation payments for compulsory acquisition.
- Deductee:Only applicable if the recipient is a resident; for non-residents, tax is deducted under Section 195.
- Threshold:No TDS is required if the total compensation in a financial year is Rs. 5,00,000 or less.
- Rate of TDS:
o 10% on compensation payments.
o Higher rates apply if PAN is not provided (Section 206AA).
- Time of Deduction:TDS must be deducted at the time of payment of compensation or enhanced compensation.
Exemptions from TDS
- Agricultural Land:
o No TDS applies if the land acquired is agricultural land (whether urban or rural).
- Land Acquisition Act:
o No TDS applies if compensation is exempt under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition Act, 2013.
- Government and Exempt Entities:
o No TDS applies on payments made to Government, RBI, Mutual Funds, or tax-exempt corporations (Section 196).
Compliance Requirements
- Lower/Nil Deduction Certificate:Available under Section 197, but not through self-declaration under Section 197A.
- Deposit of TDS:
o Payable via Challan ITNS 281 within 7 days from the end of the deduction month.
o For March deductions, deposit by 30th April.
o Government offices depositing TDS without a challan must deposit the TDS on the same day on which the tax was deducted.
- TDS Statement Filing:Quarterly submission in Form 26Q.
- TDS Certificate:Form 16A must be issued within 15 days from the due date of TDS statement filing.
Consequences of Non-Compliance
- Failure to Deduct or Deposit TDS:
o Interest liability under Section 201.
o Penalty under Section 271C (up to the undeducted amount).
o Prosecution under Section 276B.
- Failure to Furnish TDS Statement:
o Penalty of Rs. 200 per day (limited to TDS amount) under Section 234E.
o Additional penalties under Sections 271H and 272A.
- Failure to Issue TDS Certificate:Liable for penalty under Section 272A.