1% TDS to be applicable on property worth Rs 5 million or more

24 Jul 2024 CW Team

It was confirmed that 1% TDS will apply to transactions involving multiple sellers or buyers where the total consideration is Rs 5 million or more.

Section 194-IA of the Income Tax Act: This section mandates TDS on the payment of consideration for transferring certain immovable properties other than agricultural land. An amendment will be introduced to clarify this provision. - Finance Minister Nirmala Sitharaman stated, "Where there is more than one transferor or transferee involved in a property transaction, the total consideration for TDS purposes will be the combined amount paid or payable by all transferees to all transferors."

Responsibilities of buyers: - According to the law, the buyer (transferee) must deduct tax at source on the amount paid to the seller (transferor) for transferring the immovable property. - Sub-section (1) of Section 194-IA: Any person responsible for paying a resident for the transfer of any immovable property must deduct 1% TDS on the sum paid or the stamp duty value, whichever is higher. - Sub-section (2) of Section 194-IA: No TDS is required if the consideration and the stamp duty value are both less than Rs 5 million.

Clarification and amendment: - Some taxpayers have interpreted the law to mean that each individual buyer's payment must be less than Rs 50 lakh to avoid TDS, even if the total property value exceeds Rs 5 million. This interpretation contradicts the legislative intent. - The government will amend Sub-section (2) of Section 194-IA to clarify that for properties involving multiple parties, the total consideration is the combined amount paid by all buyers to all sellers.

Effective date: - These amendments will come into effect on October 1, 2024.

The government announced that a 1% Tax Deduction at Source (TDS) will be applicable on the sale of immovable property valued at Rs 5 million or more, even if multiple buyers and sellers are involved. This clarification was provided by Finance Minister Nirmala Sitharaman in her Budget Speech to address cases of misinterpretation of tax provisions. It was confirmed that 1% TDS will apply to transactions involving multiple sellers or buyers where the total consideration is Rs 5 million or more. Section 194-IA of the Income Tax Act: This section mandates TDS on the payment of consideration for transferring certain immovable properties other than agricultural land. An amendment will be introduced to clarify this provision. - Finance Minister Nirmala Sitharaman stated, Where there is more than one transferor or transferee involved in a property transaction, the total consideration for TDS purposes will be the combined amount paid or payable by all transferees to all transferors. Responsibilities of buyers: - According to the law, the buyer (transferee) must deduct tax at source on the amount paid to the seller (transferor) for transferring the immovable property. - Sub-section (1) of Section 194-IA: Any person responsible for paying a resident for the transfer of any immovable property must deduct 1% TDS on the sum paid or the stamp duty value, whichever is higher. - Sub-section (2) of Section 194-IA: No TDS is required if the consideration and the stamp duty value are both less than Rs 5 million. Clarification and amendment: - Some taxpayers have interpreted the law to mean that each individual buyer's payment must be less than Rs 50 lakh to avoid TDS, even if the total property value exceeds Rs 5 million. This interpretation contradicts the legislative intent. - The government will amend Sub-section (2) of Section 194-IA to clarify that for properties involving multiple parties, the total consideration is the combined amount paid by all buyers to all sellers. Effective date: - These amendments will come into effect on October 1, 2024.

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