The Finance Bill 2024 proposes an amendment to section 194-IA of the Income-tax Act, which mandates the deduction of tax at source (TDS) on payments made for the transfer of immovable property, excluding agricultural land. Currently, TDS is deducted at 1% of the higher of the consideration or stamp duty value of the property, but only if both are above Rs. 50 lakh. The proposed amendment, effective from October 1, 2024, clarifies that if there are multiple buyers or sellers, the TDS should be calculated on the total aggregate consideration paid, not just individual payments. This change addresses concerns that some taxpayers were avoiding TDS by splitting payments below the Rs. 50 lakh threshold, despite the total property value exceeding this limit. The update aims to enforce proper tax deduction and align with legislative intent.
Budget 2024: Amendment of provisions of TDS on sale of immovable property
Section 194-IA of the Act provides for deduction of tax on payment of consideration for transfer of certain immovable property other than agricultural land.
2. Sub-section (1) of the said section provides that any person responsible for paying to a resident any sum by way of consideration for transfer of any immovable property shall, at the time of credit or payment of such sum to the resident, deduct an amount equal to one per cent. of such sum or the stamp duty value of such property, whichever is higher, as income-tax thereon. Sub-section (2) of the said section provides that no deduction of tax shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property, are both less than fifty lakh rupees.
3. It has been observed 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.
4. Hence if the buyer is paying less than Rs. 50 lakh, no tax is being deducted, even if the value of the immovable property and stamp duty value exceeds Rs. 50 lakh. This is against the intention of legislature.
5. 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 or transferee 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.
6. The amendments will take effect from the 1st day of October, 2024.
Extract of Clause 58 of Finance Bill 2024
Clause 58 of the Bill seeks to amend section 194-IA of the Income-tax Act relating to payment on transfer of certain immovable property other than agricultural land.
Sub-section (1) of the said section provides that any person, being a transferee, responsible for paying to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit or payment, whichever is earlier, of such sum to the transferor, deduct an amount equal to one per cent. of such sum or the stamp duty value of such property, whichever is higher, as income-tax thereon.
Sub-section (2) of the said section provides that no deduction of tax shall be made where the consideration for the transfer of an immovable property and the stamp duty value of such property, are both less than fifty lakh rupees.
It is proposed to insert a proviso to sub-section (2) of the said section so as to provide that where there is more than one transferor or transferee in respect of any immovable property, then the 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.
This amendment will take effect from 1st October, 2024.
Proposed Amendment to section 194-IA of Income Tax Act, 1961 vide Finance Bill, 2024
In section 194-IA of the Income-tax Act, in sub-section (2), the following proviso shall be inserted with effect from the 1st day of October, 2024, namely:––
“Provided that where there is more than one transferor or transferee in respect of any immovable property, then the 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.”.
Is this rate of 1% applicable for NRIs also who is a seller or only for Resident Indians?
No for non residents the rates are different only applicable for resident Indians