TDS on Payments of Compensation on Acquisition of certain Immovable Property (Section 194LA)

1. Who is responsible to Deduct TDS under Section 194LA

2. When TDS under Section 194LA is to be Deducted:

3. Rate of TDS under Section 194LA for the Financial Year 2018-19 and 2019-20

4. Where No TDS under Section 194LA is to be Deducted

5. Where TDS under Section 194J is either Not to be Deducted or to be Deducted at Lower Rate [Section 194 Rule 28 and 28AA]

Section 194LA was inserted with effect from October 1, 2004. The provisions of section 194LA are given below—

1. Who is responsible to Deduct TDS under Section 194LA

Any person, who is responsible for paying, on or after 1.10.2004, to a resident, any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property (other than agricultural land) shall, deduct income-tax thereon.

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

2. When TDS under Section 194LA is to be Deducted:

It will be deducted :

1. at the time of payment of such sum in cash or by the issue of a cheque or draft or

2. by any other mode,

whichever is earlier.

3. Rate of TDS under Section 194LA for the Financial Year 2018-19 and 2019-20

10% of such compensation.

Notes:

1. No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.

2. The rate of TDS will be 20% in all cases, if PAN is not quoted by the deductee.

4. Where No TDS under Section 194LA is to be Deducted

1. No deduction shall be made under this section in a case where the amount of such payment or as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed Rs.2,50,000.

2. No deduction shall be made under this section where such payment is made in respect of any award or agreement which has been exempted from levy of income-tax under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

5. Where TDS under Section 194J is either Not to be Deducted or to be Deducted at Lower Rate [Section 194 Rule 28 and 28AA]

Any person to whom compensation is payable may make an application in Form No. 13 to the Assessing Officer and obtain such certificate from him, as may be appropriate, authorising the payer not to deduct tax or to deduct tax at a lower rate.

As per section 206AA(4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number (PAN) of the applicant.