What Budget says - Provisions of TDS on sale of immovable property - Consideration of stamp duty value of the immovable property.

[CS Swati Dodhi]

Provisions of TDS on sale of immovable property - Consideration of stamp duty value of the immovable property.

Section 194-IA - Payment on transfer of certain immovable property other than agricultural land.

(1)Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) 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 of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.

(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.

(3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this 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. 

In order to remove such 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. Also no tax is to be deducted under section 194-IA in case the consideration paid for the transfer of immovable property and the stamp duty value of such property are both less than fifty lakh rupees.

Stamp duty value shall have the meaning assigned to it in clause (f) of the Explanation to clause (vii) of sub-section (2) of section 56. 

This amendment will take effect from 1^st April, 2022.