BUDGET 2019 : TDS at the time of purchase of immovable property

TDS at the time of purchase of immovable property

Section 194-IA of the Act relates to payment on transfer of certain immovable property other than agricultural land and provides for levy of TDS at the rate of one percent. on the amount of consideration paid or credited for transfer of such property. The term consideration for immovable property is presently not defined for the purposes of this section. It is noted that in the transaction involving purchase of immovable property, there are other types of payments made besides the sales consideration and the buyer is contractually bound to make such payments to the builder/seller, either under the same agreement or under a different agreement. Some of such payments are those for rights to amenities like club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee etc. Accordingly, it is proposed to amend the Explanation to said section and provide that the term consideration for immovable property shall include all charges of the nature of club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property.

For Example Mr Deepak booked a Flat of Rs. 40 Lakhs on 01-06-2019. He paid the entire amount on the date of booking. On that date he was not liable to deduct TDS. At time of handing the possession on 01-11-2019, the seller asked the Mr Deepak for additional payment of Rs. 15 lakhs for car parking and Club Membership Fees.

Now as per the proposed amendment Mr. Deepak shall deduct tax from total consideration (i.e. Rs. 55 lakhs) at 1% (Rs. 55,000) and deposit the same by December 30, 2019.

This amendment will take effect from 1st September, 2019.