Section 194-IA

Section 194-IA — the law in short

What the courts have decided on section 194-IA, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Srirangapattinam Desigan Srinivasan v DCIT (CPC-TDS) High CourtHelps taxpayerNo later treatment found
  I bought a flat, deducted one per cent under s.194-IA, and CPC has hit me with a demand because the seller's PAN was not linked to Aadhaar. Is there a High Court decision I can put in front of the officer?
  Yes. The Madras High Court disposed of a writ against exactly such a demand by holding that nothing survived for adjudication once Circular No. 6/2024 applied and the department had itself reprocessed the statement and reported no defaults. The judgment is worth having chiefly because it reproduces Circular No. 6/2024 in full, with its file number and date, which is otherwise hard to source.
• Muniswamappa Ananda v. ITO, Ward 6(1)(1), Bengaluru (ITAT Bangalore) — population and aerial-distance certificates admitted as additional evidence under Rule 29, and the section 2(14)(iii) exclusion applied to delete a Rs 1.28 crore addition ITATHelps taxpayerNo later treatment found
  My client sold inherited farm land, filed no return because he thought it was exempt, and an ex parte assessment has taxed the whole sale consideration. He now has the population and distance certificates. Can he still produce them?
  Yes, and it worked. The Tribunal admitted the population certificate and the distance certificate as additional evidence under Rule 29 of the ITAT Rules because they related to the core issue contested and had not been available before the revenue authorities, condoned a 180-day delay, and held on those documents that the land sold was agricultural land situated beyond the prescribed municipal limits and distance in section 2(14)(iii), so that it did not constitute a "capital asset" and the gain was not chargeable as capital gains under section 45. The addition of Rs 1,28,00,000 made ex parte under section 144 as undisclosed short-term capital gain, and sustained by the Commissioner (Appeals), was deleted and the appeal allowed.
• Shailesh Veljibhai Paladiya v. ITO, TDS Ward-2, Surat (ITAT Surat) — section 206AA cannot be invoked where section 194-IA itself is not attracted, and deducting one per cent by mistake is not an admission of liability ITATHelps taxpayerNo later treatment found
  I deducted one per cent on a land purchase where the sellers had no PAN, and the officer says I should have deducted twenty per cent under section 206AA. The land was agricultural. Can he charge me the difference because I deducted something?
  No. The Tribunal held that section 206AA merely prescribes a higher rate where tax is otherwise deductible and does not create an independent liability to deduct, so unless the transaction falls within section 194-IA the enhanced rate cannot be invoked at all. The land being agricultural, section 194-IA was not attracted, and the section 201(1) demand of Rs 44,95,590 and the section 201(1A) interest of Rs 42,25,854 were both deleted.
• Sanchit Gupta v DCIT (CPC), TDS ITATHelps taxpayer
  I bought a flat and deducted 1 per cent under s.194-IA. CPC has raised a 20 per cent short-deduction demand because the seller's PAN was inoperative for want of Aadhaar linking. The seller has since linked it. Is there any way out?
  Yes, but not the one most people reach for. The Delhi Bench held that the assessee fell outside the CBDT relief circulars on his dates, and that subsequent linking does not retrospectively cure the position. It nonetheless directed that no s.206AA liability be cast on him if the seller is shown to have declared the sale in her return and paid the tax, applying the Ansal Landmark principle by analogy, and remitted the matter for verification — observing that the department was equally responsible for not red-flagging inoperative PANs in its own system.
• ITO (TDS-3), Ahmedabad v. Tarun Santramdas Varma (ITAT Ahmedabad) — rural agricultural land is outside section 194-IA, and the Revenue's appeal against deletion of a Rs 1.69 crore section 201 demand was dismissed ITATHelps taxpayerNo later treatment found
  The TDS officer says I should have deducted under section 194-IA on land I bought, and has applied twenty per cent under section 206AA because the farmer-sellers had no PAN. The land is agricultural. Does that answer the demand?
  Yes, if you can prove the land is rural agricultural land. The Tribunal dismissed the Revenue's appeal and upheld the deletion of a Rs 1,69,34,640 demand, holding that the lands qualified as rural agricultural land and fell outside the scope of section 194-IA, so the assessee could not be treated as an assessee in default under section 201(1) and the section 201(1A) interest was not sustainable either.
• Nathani Parekh Constructions Pvt Ltd v ITO (TDS) (ITAT Mumbai) — section 194-IC does not reach alternate accommodation and hardship compensation paid under a redevelopment agreement ITATHelps taxpayerNo later treatment found
  As a developer under a redevelopment agreement I pay tenants a monthly sum for alternate accommodation and a hardship allowance. The TDS officer says every sum paid under the agreement attracts section 194-IC at ten per cent. Is he right?
  No. The Tribunal held that a sum is within section 194-IC only if it is consideration paid as part of a share in the land or building or both under a specified agreement, including cash payments forming part of that share. Alternate accommodation charges and hardship allowance are compensation for the hardship of dispossession and for rent payable elsewhere until redevelopment is complete; they are not a share in the land or building, so section 194-IC does not apply and the developer is not an assessee in default for not deducting.
• Sachin Kumar Kabra v. ITO (TDS), Bhilwara (ITAT Jodhpur) — two brothers each paying under fifty lakh for a Rs 65.11 lakh plot owed no section 194-IA deduction ITATHelps taxpayerSuperseded by amendment
  My brother and I bought a plot from the development authority for Rs 65.11 lakh and paid half each. The Commissioner (Appeals) says the threshold is per property, so we should have deducted. Who is right?
  For a purchase before 1 October 2024 the assessee was right and the Commissioner (Appeals) was wrong. The Tribunal, following its own Coordinate Bench in Dalpat Singh Nanecha, held that the case was fully covered and directed the Assessing Officer to delete the entire demand raised under section 201(1) and section 201(1A) for non-deduction under section 194-IA.
• Shamim Irshad v. ITO, Ward-77(2), New Delhi (ITAT Delhi) — before 1 October 2024 the section 194-IA obligation was qua each transferee, not qua the aggregate consideration ITATHelps taxpayerSuperseded by amendment
  I bought a flat jointly with my husband for Rs 55 lakh in 2015 and I paid Rs 40 lakh of it. The TDS officer has made me an assessee in default under section 194-IA because the property crossed fifty lakh. Was I obliged to deduct?
  For a purchase before 1 October 2024, no. The Tribunal held that the obligation cast by section 194-IA is qua each transferee and not qua the aggregate consideration, so where the transferee in question neither credited nor paid more than fifty lakh rupees the section has no application and no default under section 201(1) or 201(1A) arises.
• Vinod Soni v ITO (TDS) ITATHelps taxpayerSuperseded by amendment
  Four of us bought jointly, each share under Rs 50 lakh — is 194-IA TDS due after the 2024 change?
  Yes, for anything on or after 1 October 2024. This order held the Rs 50 lakh limit in s.194-IA(2) is tested against each transferee's own share, so four buyers at Rs 37,50,000 each owed nothing on a Rs 1.5 crore deed — but a proviso inserted by the Finance (No.2) Act, 2024 with effect from 1 October 2024 aggregates the amounts paid by all transferees to all transferors, so the order now governs only earlier transactions.
• Statutory position — s.194LA: TDS on compensation for compulsory acquisition of immovable property, and the RFCTLARR s.96 carve-out CBDT Circulars & InstructionsCuts both ways
  The land acquisition officer has deducted ten per cent from my compensation cheque. When is s.194LA actually attracted, what is the threshold now, and does the RFCTLARR exemption stop the deduction?
  Section 194LA obliges any person paying a resident compensation, enhanced compensation, consideration or enhanced consideration on account of compulsory acquisition of immovable property, under any law for the time being in force, to deduct ten per cent at the time of payment. Three things cut it down: the section does not touch agricultural land at all, because 'immovable property' is defined to exclude it; the first proviso stops deduction where the payment or the aggregate of payments to that resident in the financial year does not exceed five lakh rupees, that figure having replaced 'two lakh and fifty thousand' by Act No. 7 of 2025 with effect from 1 April 2025; and the second proviso stops deduction altogether where the payment is made in respect of any award or agreement exempted from levy of income-tax under s.96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
• Statutory position — s.194-IA: the fifty lakh threshold, the multiple-transferor/transferee proviso from 1 October 2024, and the stamp duty value base from 1 April 2022 CBDT Circulars & InstructionsCuts both ways
  Four of us bought one flat and each of us paid under fifty lakh rupees. The TDS officer says we should have deducted under section 194-IA. Did we have to, and does the answer depend on when we bought?
  It depends entirely on the date. From 1 October 2024 sub-section (2) carries a proviso which says that where there is more than one transferor or transferee in respect of any immovable property, the consideration is the aggregate of the amounts paid or payable by all the transferees to the transferor or all the transferors — so a flat bought by four buyers for Rs 80 lakh is inside section 194-IA even though each buyer pays Rs 20 lakh. For a transfer before that date there is no such aggregation rule in the section, and the Tribunal has repeatedly read the obligation as arising qua each transferee.
• Statutory position — section 139AA(2) and rule 114AAA: what an inoperative PAN actually does, and the CBDT circulars that undo it CBDT Circulars & InstructionsCuts both ways
  CPC has raised a short-deduction demand on me because my payee's PAN was inoperative for want of Aadhaar linking. What exactly does an inoperative PAN do, and is there any Board relief?
  An inoperative PAN carries four consequences and only four, and rule 114AAA(3) lists them: no refund of tax is made, no interest is payable on that refund for the period, tax deductible under Chapter XVII-B is deducted at the higher rate under section 206AA, and tax collectible under Chapter XVII-BB is collected at the higher rate under section 206CC. The third and fourth of those fall on the DEDUCTOR or COLLECTOR, not on the person who failed to link, which is why the demand lands on someone who did nothing wrong. The Board has issued a sequence of circulars relieving the deductor where the PAN is made operative by a date, and the sequence — Circular No. 3/2023 dated 28 March 2023, Circular No. 6/2024 dated 23 April 2024 and Circular No. 9/2025 dated 21 July 2025 — is the first thing to check, before any argument on merits.
• Notification 67/2022 — the 194S forms CBDT Circulars & InstructionsCuts both waysNo later treatment found
  I deducted 1% under s.194S on a peer-to-peer purchase. Which challan and which certificate, and by when?
  Form 26QE and Form 16E, on a thirty-day clock. A specified person deducting under s.194S pays the tax within thirty days from the end of the month of deduction, accompanied by a challan-cum-statement in Form 26QE filed electronically within the same thirty days, and issues the certificate in Form 16E to the payee within fifteen days of that due date. Form 26Q was substituted at the same time to carry ss.194R and 194S for deductors who are not specified persons.
• Statutory position — s.194-IC: ten per cent on the cash consideration under a specified agreement, with no threshold at all, and the one section in this family that does not disapply s.203A CBDT Circulars & InstructionsCuts both waysNo later treatment found
  I am the developer under a joint development agreement with an individual landowner. I am giving him constructed area plus some cash. What do I have to deduct, on what, and do I need a TAN?
  You deduct ten per cent, but only on the monetary consideration. Section 194-IC applies notwithstanding section 194-IA to any person responsible for paying a resident any sum by way of consideration, 'not being consideration in kind', under the agreement referred to in section 45(5A), at the time of credit to the payee's account or at the time of payment, whichever is earlier — and unlike sections 194-IA, 194-IB and 194M it contains no provision disapplying section 203A, so the deductor needs a TAN and files an ordinary quarterly return.
• Statutory position — s.2(14)(iii): when agricultural land is NOT a capital asset, and the aerially measured distance test substituted by the Finance Act, 2013 with effect from 1 April 2014 CBDT Circulars & InstructionsCuts both ways
  My client sold ancestral farm land near a town and the Assessing Officer has charged capital gains. What are the exact population and distance limits in section 2(14)(iii), and from when is the distance measured aerially rather than by road?
  Agricultural land in India is not a "capital asset" at all unless it falls inside one of the two areas described in s.2(14)(iii), so a sale of land outside them produces no capital gain to charge. Item (a) catches land within the jurisdiction of a municipality (however described) or a cantonment board having a population of not less than ten thousand. Item (b) catches land within an aerially measured distance of the local limits of such a municipality or cantonment board: not more than two kilometres where its population is more than ten thousand but not exceeding one lakh; not more than six kilometres where it is more than one lakh but not exceeding ten lakh; and not more than eight kilometres where it is more than ten lakh. Item (b) in that aerially measured form was substituted for the earlier item (b) by the Finance Act, 2013, with effect from 1 April 2014.
• Statutory position — s.10(37): the four cumulative conditions for exempting capital gain on the compulsory acquisition of urban agricultural land CBDT Circulars & InstructionsCuts both waysNo later treatment found
  My client's agricultural land inside the municipal limits has been compulsorily acquired. Section 2(14)(iii) does not help because the land is urban. What exactly must he prove under section 10(37)?
  Section 10(37) exempts capital gain on the transfer of agricultural land where four conditions are ALL satisfied. The assessee must be an individual or a Hindu undivided family. The land must be situated in an area referred to in item (a) or item (b) of s.2(14)(iii) — that is, it must be the urban agricultural land which IS a capital asset. The land must, during the period of TWO YEARS immediately preceding the date of transfer, have been used for agricultural purposes by that Hindu undivided family or individual, or by a parent of his. The transfer must be by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India. And the income must have arisen from compensation or consideration received on or after 1 April 2004. An Explanation provides that "compensation or consideration" includes compensation or consideration enhanced or further enhanced by any court, Tribunal or other authority.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.