TDS on Purchase or Sale of Immovable Property

INTRODUCTION

The sell or Purchase of the Immovable property is most important decision, in which buyer generally evaluate the title of the Property, Location of the Property, existing Charge on the Property in addition to these aspects the buyer of property should keep into the minds about the Provisions of TDS at the time of Purchase of immovable property. The buyer will deduct the TDS at the rate of 1% on the sale Consideration or Stamp duty value which is higher.

APPLICABLE PROVISIONS: The sale or Purchase of immovable property other than agricultural land is governed by the Provisions of section 194-IA of the Income tax act, 1961.

Applicability of Provision of section 194-IA –The buyer will be responsible to deduct the TDS on Purchase of immovable property at the rate of 1% of Sale Consideration before making the payment to the seller for purchase of immovable property.

Note: If the consideration for transfer of immovable property and stamp duty value of the property both is less than the 50 lakh there is no requirement to deduct the TDS.

When to Deduct the TDS on Transfer of Property: The Buyer will deduct a TDS before the transfer of consideration to the seller or at the time of payment of such sum in cash or issue of cheque or draft or by any other mode whichever is earlier.

Meaning of Agricultural Land: Agricultural land means agricultural lands in India, not being a land situated in any area referred to in section 2(14)(iii)(a)/(b).

Following Land will not we treated as Agriculture land if:

• If the land is situated with in jurisdiction of municipality or cantonment Board where Population of not less than 10000 or
• If the land is situated in any area with below given distances measured aerially:

What Covered in the Immovable Property:

1. Land (other than agricultural land)

2. Building

3. Part of Building.

Conditions to be satisfied for Deduction of TDS

• Purchaser of the Property shall be resident of the India.
• Seller must be resident of the India.
• The Consideration of the Property or stamp value of the property must be Rs. 50 lakh or more.

Period in which TDS will be deposited with the Central Govt:

The buyer shall deposited the TDS deducted under section 194-IA with the Central govt with in 30 days from the end of month in which deduction was made.

Amount on which TDS will be deducted: Buyer has to deduct TDS at the rate of 1% on higher of Sale Consideration or Stamp duty Value. Let’s take an example for Understanding this Point:

The above comments do not constitute professional advice. I am is CS Piyush Goyal and I am Practicing Company Secretary and feel free to contact with us if you have any query M-8279255794.