Budget 2024: Important Clarification on TDS on Sale of Immovable Property

The Budget 2024 was presented on July 23, 2024, in the Parliament by the Finance Minister. This Budget brings various changes in taxation and other sectors. In this Budget, the government issued a clarification on TDS on the sale of immovable property.

Amendment of Provisions of TDS on Sale of Immovable Property

Section 194-IA of the Act provides for the deduction of tax on payment of consideration for the transfer of certain immovable property other than agricultural land.

According to sub-section (1) of the said section, any person responsible for paying to a resident any sum in consideration for the transfer of any immovable property shall deduct an amount equal to 1% of such sum or the stamp duty value of such property, whichever is greater, as income-tax thereon when crediting or paying such sum to the resident.

Sub-section (2) of the stated section states that no tax deduction would be made if 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 has been noticed that some taxpayers perceive the consideration paid or credited as each individual buyer’s payment rather than the overall consideration paid for the immovable property.

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 the legislature.

As a result, 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 immovable property, the consideration shall be the total of the amounts paid or payable by all transferees to the transferor or all transferors for the transfer of such immovable property.

The amendments will take effect from the 1st day of October 2024.