TDS on the Sale of Property; FAQs on Deduction of TDS by Transferee of Immovable Property
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- Last Updated on 24 April, 2023
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TDS on sale of property
Example 1 Consideration as per Builder Buyer Agreement/Agreement to Sell:Rs.48 Lakhs Stamp Duty value: Rs.50 Lakhs Stamp Duty Valuation is irrelevant In view of consideration being less than Rs. 50 lakhs,no TDS is deductible under existing provisions of section 194-IA Here, stamp duty value is Rs.50 lakhs though consideration is less than Rs.50 lakhs. Therefore,TDS is deductible from the consideration . TDS amount will not be 1% of consideration as before but 1% of higher of consideration and SDV. From payment of Rs.48 lakhs, TDS to be deducted will be Rs 50,000,not Rs.48,000 Example 2 Consideration as per Builder Buyer Agreement(BBS)/Agreement to Sell(ATS):Rs.49 Lakhs Stamp Duty value: Rs.53 Lakhs Stamp Duty Valuation is irrelevant In view of consideration being less than Rs. 50 lakhs,no TDS is deductible under existing provisions of section 194-IA Here,stamp duty value is Rs.53 lakhs though consideration is less than Rs.50 lakhs. It can be seen that SDV does not exceed the safe harbour limit under section 43CA/Section 50C of 110% of the consideration is Rs.53.90 lakhs. Though section 43CA and section 50C are not attracted,TDS under section 194-IA is attracted as SDV is Rs.50 lakhs or more.Though consideration as per ATS/BBA,and not SDV, will be adopted for section 43CA/Section 50C purposes,TDS will be deductible on higher of SDV and consideration ie @ 1% of 53 lakhs.TDS to be deducted=Rs.53,000. TDS to be deducted from consideration of Rs.48 lakhs will be Rs 53,000, not Rs.48,000. The Explanatory Memorandum explains the proposed amendment as follows: “2. As per the provisions of the said section, TDS is to be deducted on the amount of consideration paid by the transferee to the transferor. This section does not take into account the stamp duty value of the immovable property, whereas, as the provisions of section per 43CA and 50C of the Act, for the computation of income under the head “Profits and gains from business or profession” and “capital gains” respectively, the stamp duty value is also to be considered. Thus there is inconsistency in the provisions of section 194-IA and sections 43CA and 50C of the Act. 3. In order to remove inconsistency, it is proposed to amend section 194-IA….” Though the avowed objective of the proposed amendments, as per the Explanatory Memorandum to Finance Bill,2022, is to remove inconsistency between the provisions of section 194-IA and the provisions of sections 43CA and 50C,the proposed amendments do not completely align the provisions of section 194-IA with those of sections 43CA/50C. There is only limited alignment in that stamp duty value will be considered for TDS purposes.The safe harbour limit of 10% of consideration for difference between SDV and consideration, is not proposed in amendment to section 194-IA.Thus,after the proposed amendments,there might be a situation where TDS has to be deducted as per SDV even though actual consideration is accepted under section 43CA/section 50C for computation of business income or capital gains.
As consideration is less than Rs.50 lakhs,as per existing provisions which are applicable till 31-3-2022, TDS will not be attracted.This matter needs CBDT’s clarification.
Date of registry in buyer’s name: 05.07.2022 The applicability of the above provisions are illustrated in Table below (PC)
Q 1.What amendments have been proposed to section 194-IA by Finance Bill,2022 as regards deduction of TDS by buyer of immovable property from payments to seller?
Ans.
Extant provisions of section 194-IA
Amendments proposed by Finance Bill,2022 with efffect from 1-4-2022
Sub-section (1) provides for deduction of TDS by any person responsible for paying to a resident any sum by way of consideration for transfer of any immovable property(other than rural agricultural land in India) at the time of credit or payment of such sum to the resident. TDS is to be deducted at the rate of 1% of such sum ie 1% of sum by way of consideration
TDS is to be deducted at the rate of 1%. of such sum(consideration) paid or credited to the resident or the stamp duty value of such property, whichever is higher.
Sub-section (2) provides that no deduction of tax shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.
No tax is to be deducted under section 194-IA if the consideration paid for the transfer of immovable property and the stamp duty value of such property are both less than fifty lakh rupees
Liability of buyer to deduct TDS under existing provisions
Liability of buyer to deduct TDS under provisions after proposed amendments
No TDS if consideration as per BBA/ATS is less than 50 Lakhs[Sub-section (2)]
No TDS only if both consideration as per BBA/ATS and stamp duty value are less than Rs.50 Lakhs.
Liability of buyer to deduct TDS under existing provisions
Liability of buyer to deduct TDS under provisions after proposed amendments
No TDS if consideration as per BBA/ATS is less than 50 Lakhs[Sub-section (2)]
No TDS only if both consideration as per BBA/ATS and stamp duty value are less than Rs.50 Lakhs.
Q 2.What is the objective of the proposed amendments?
Ans. The extant TDS provisions of section 194-IA can be circumvented by showing less than Rs.50 lakhs(say Rs.49 lakhs) in BBA/ATS/Sale deed and transacting the balance amount off the record in cash For example, in Example 1 above,TDS can be evaded under existing provisions by showing Rs.48 lakhs on paper and paying and receiving balance consideration (say Rs.2 lakhs in cash).The proposed amendment seeks to plug this loophole.
Q 3.What is the effective date of the proposed amendments to section 194-IA?
Ans. The proposed amendments shall take effect from 1-4-2022.
Q 4.Will the proposed amendments apply where ATS/BBA is entered into on or before 31-3-2022 by paying a token amount of consideration(say 5% of total consideration) which is mentioned in ATS/BBA?
Suppose consideration =Rs.49 lakhs and SDV=Rs.51 lakhs.
Whether TDS is liable to be deducted as per amended provisions on balance consideration paid on or after 1-4-2022?
Ans. In the case of Canara Bank v. ITO [2009]121 ITD 1(Nag.-Trib.), the Tribunal held that the term ‘at source’ also suggests that the deduction has to be at that time, namely, when the payment is made, and if the source time had expired and at that time there was no liability to deduct tax,there cannot be a liability to deduct tax afterwards in the absence of the source at which it was to be deducted. The liability cannot relate back as one cannot go back in the matter of time nor can the wheels of time be retrieved.
Q 5. SDV as of what date must be considered? As of the date of entering into BBA/ATS? Or as of date of registration of sale deed of the immovable property?
Ans. Suppose ATS/BBA is entered into on 5-4-2022.The agreed consideration as per ATS/BBA is Rs.48 lakhs.The SDV on that date is Rs.47 lakhs.SDV is revised upward to Rs.51 lakhs as of date of registering the sale deed. Question arises whether the proposed amended section 194-IA is attracted here? The proposed amendments to section 194-IA are silent on this aspect.It can be argued that the SDV prevailing as on date of ATS/BBA should be taken,in view of the the ratio in Canara Bank (supra)
Q 6. What will be the implications under section 50C/Section 56(2)(x) and Section 194-IA in respect of ATS/BBA entered into on or after 1-4-2022?
Ans. Date of ATS and payment of part amount by specified cashless modes:05.04.2022
Situation 1
Situation 2
Situation 3
SDV as on 05.07.2022
52,00,000
51,00,000
54,00,000
Stamp Duty Value(SDV) as on 05.04.2022
(1)
50,00,000
49,00,000
52,00,000
Purchase consideration
(2)
47,00,000
44,00,000
51,00,000
110% of PC
(3)
51,70,000
48,40,000
56,10,000
Whether SDV on 05.04.2022 exceeds 110% of PC
(4)
No
Yes
No
SDV minus PC (1) minus (2)
(5)
3,00,000
5,00,000
1,00,000
Amount taxable in the hands of buyer under section 56(2)(x)
(6))
Nil
5,00,000
Nil
Cost of acquisition in hands of buyer for calculating capital gains in future
(7)
47,00,000
49,00,000
51,00,000
Full value of consideration in the hands of transferor)under section 50C/
(8)
47,00,000
49,00,000
51,00,000
Whether PC is Rs.50 L or more?
(9)
No
No
Yes
Whether SDV on 5-4-2022 is Rs.50 L or more?
(10)
Yes
No
Yes
Whether TDS u/s 194-IA applicable
(11)
Yes
No
Yes
Amount on which 1% TDS will be calculated
(12)
50,00,000
—-
52,00,000
TDS amount to be deducted @ 1% of (13)
(14)
50,000
—–
52,000
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Dear Sir/ Madam,
Can you please let me know whether TDS is applicable if immovable property is gifted and its Stamp Duty Value is more than Rs. 50 Lacs?
As the recipient has not purchased an immovable property, and no sale consideration is payable by him, Section 194-IA is not applicable in this case. However, the value of the property would be taxable in accordance with Section 56.
Dear Sir/ Madam,
Can you please let me know Applicable TDS, if immovable property is purchased from NRI?
The sale value of the Property is: 21,50,000
Stamp Duty value is: 30,87,000
In this case, TDS will be deducted by the buyer on the Sale Value of the Property or Stamp Duty Value.
Thanks
Hi, The capital gains shall be computed considering the stamp duty value as the full value of consideration. As the seller is a non-resident, you may approach the AO by filing a Form 15E for determining the appropriate proportion of sum chargeable to tax under Section 195.
If Property is transferred no sale deed register will TDS applicable
Hi Bhushan, Yes because the tax is deducted at the time of payment or at the time of credit of consideration, whichever is earlier.
Hello, Whether TDS is required to be deducted even if the ATS is registered in 2012 and the final sale deed is being registered now in October 2022. The entire consideration is already paid in 2012. Thanks in advance
Hi Nilesh, as per the information given by you, the agreement to sell was registered in 2012. Further, the entire consideration was also paid in the year 2012. The provisions of section 194-IA are applicable in respect of payment (or credit entry) made to buy an immovable property on or after June 1, 2013. Thus, no tax shall be required to be deducted in your case.
As per the sale Agreement the Owners are joint owners
and total sale consideration paid by one person
while paying TDS under this section buyer of property is single or multiple buyer we need to select
In case of joint buyers, tax under section 194-IA must be deducted separately by each individual buyer as per their respective ownership ratio (if not defined, it may be taken as 50:50). Therefore, Challan-cum-Statement in Form 26QB is to be filled in by each buyer for unique buyer-seller combination for respective share. E.g. in case of 1 buyer and 2 sellers, 2 forms have to be filled in and for 2 buyers and 1 seller, 2 forms have to be filled in for their respective shares.
please let me know if TDS is applicable when property is registered by a government department to an auction purchaser declared as successfful bidder in a public action.
Yes TDS provisions are applicable. Section 194-IA provides no exemption if the property is registered by a Govt. Department.
ATS has been made for sale consideration of 55 Lakhs. Sale deed and registration is pending. 11 Lakhs has been paid in advance as part of ATS.
Pls let me know whether, TDS Rs. 11000 is deductible for the 11 Lakhs paid at the time of advance payment during ATS? AND remaining Rs. 44000 at the time of sale deed or registration? (multiple Form 26QB Filings)
OR
Entire 1% of TDS Rs. 55000 is deductible at the time of registration or sale deed (single Form 26QB Filing)
As per section 194-IA, the tax shall be deducted at the time of payment or at the time of credit of consideration, whichever is earlier.
If the total consideration value is 90lakhs and flat is purchased jointly 50:50, for each buyer the consideration value is 45L; as this figure is less than 50 lakhs, is TDS of 1% still required to be dedcuted?
No, there is no need to deduct TDS as the individual consideration is less than 50L.
Please refer case law – Vinod Soni vs. ITO, TDS, Faridabad (ITA No.2736/Del/2015 for Asst. Year
2014-15 by Hon’ble ITAT, Bench ‘B’, New Delhi)
There is no need to deduct TDS as the individual consideration is less than 50L.
There is no need to deduct TDS as the individual consideration is less than 50L.
Hello,
Please let me know that if Purchase Consideration is Rs. 2,85,00,000/- and Stamp Duty value is Rs. 3,00,00,000/- then TDS is to be deducted on which value?
Tax shall be deducted at the rate of 1% of sales consideration or stamp duty value, whichever is higher.