Mumbai: In case of purchase of immovable property (other than agricultural land) from a resident seller, of over Rs. 50 lakh, a TDS of 1% will apply, even if there are more than one buyers and the contribution of each buyer works out to less than Rs. 50 lakh. The same principle will also apply in case of multiple sellers, where the share of each seller is less than Rs.50 lakh, but the aggregate sale-price of the property is over Rs. 50 lakh.
The 1% TDS applies on the purchase price or the stamp duty value, whichever is higher. This amendment proposed in Budget 2024, comes into effect from October 1.
The explanatory memorandum points out that, “Some taxpayers are interpreting that the consideration being paid or credited refers to each individual buyer’s payment rather than the total consideration paid for the immovable property.” The memorandum illustrates that based on this interpretation, if buyers are paying less than Rs. 50 lakh each, no tax is being deducted, even if the purchase value of the immovable property or stamp duty value exceeds Rs. 50 lakh. “This is against the intention of the legislature,” it states.
“Accordingly, it is proposed to amend sub-section (2) of section 194-IA of the Act to clarify that where there is more than one transferor (seller) or transferee (buyer) in respect of an immovable property, then such 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.”
Tax experts point out that buyers should be aware of this change as the penalties for not deducting and depositing tax at source are significant. In addition to deducting and depositing the TDS the buyers also have to issue the TDS certificates after generating the same on the I-T department’s e-portal (TRACES). This amendment will increase the compliance burden for buyers.
The 1% TDS applies on the purchase price or the stamp duty value, whichever is higher. This amendment proposed in Budget 2024, comes into effect from October 1.
The explanatory memorandum points out that, “Some taxpayers are interpreting that the consideration being paid or credited refers to each individual buyer’s payment rather than the total consideration paid for the immovable property.” The memorandum illustrates that based on this interpretation, if buyers are paying less than Rs. 50 lakh each, no tax is being deducted, even if the purchase value of the immovable property or stamp duty value exceeds Rs. 50 lakh. “This is against the intention of the legislature,” it states.
“Accordingly, it is proposed to amend sub-section (2) of section 194-IA of the Act to clarify that where there is more than one transferor (seller) or transferee (buyer) in respect of an immovable property, then such 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.”
Tax experts point out that buyers should be aware of this change as the penalties for not deducting and depositing tax at source are significant. In addition to deducting and depositing the TDS the buyers also have to issue the TDS certificates after generating the same on the I-T department’s e-portal (TRACES). This amendment will increase the compliance burden for buyers.