24/01/2023
TDS ON SALE OF PROPERTY
Section 194-IA
Under Section 194-IA of the Income-Tax Act, a buyer is liable to deduct and submit 1% of the transaction cost as TDS on sale of property if the value of the property is over Rs 50 lakh. Section 194-IA, however, does not specify which amount should be considered to calculate the TDS on property sale if there is a variation between the stamp duty value and the actual sale value of the property.
It begs mention here that one cannot register a property below government-determined circle rates, based on which stamp duty on the transaction is calculated. The market rate of the property could be higher or lower than its stamp duty value. In such a case, the buyer will have to calculate TDS on property sale based on the value which is higher, according to the announcement on February 1, 2022.
“Section 194-IA of the Act provides for deduction of tax on payment on transfer of certain immovable property other than agricultural land. Sub-section (1) of the said section provides for deduction of tax by any person responsible for paying to a resident any sum by way of consideration for transfer of any immovable property (other than agricultural land) at the time of credit or payment of such sum to the resident at the rate of 1% of such sum as income-tax thereon. 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 Rs 50 lakh,” the Memorandum to the Budget 2022 explains.
“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,” it adds.
“In order to remove inconsistency, it is proposed to amend Section 194-IA of the Act to provide that in case of transfer of an immovable property (other than agricultural land), TDS is to be deducted at the rate of 1% of such sum paid or credited to the resident or the stamp duty value of such property, whichever is higher,” it further adds.
In case the consideration paid for the transfer of immovable property and the stamp duty value of such property are both less than Rs 50 lakh, no tax is to be deducted under Section 194-IA.
