The Finance (No. 2) Bill, 2024, introduces significant amendments to Section 194-IA of the Income Tax Act, 1961, which deals with the deduction of tax at source (TDS) on the sale of immovable property other than agricultural land. The purpose of this amendment is to clarify the tax deduction obligations in cases where there are multiple buyers or sellers involved in the transfer of property.
Current Provisions
Under the current provisions of Section 194-IA:
- Any person responsible for paying a resident any sum as consideration for the transfer of an immovable property must deduct tax at the rate of 1% of such sum or the stamp duty value of such property, whichever is higher.
- No tax is deducted if both the consideration for the transfer and the stamp duty value of the property are less than ₹50 lakh.
Issues with Current Provisions
Some taxpayers have interpreted the consideration paid or credited as referring to each individual buyer’s payment rather than the total consideration paid for the immovable property. As a result, if each buyer pays less than ₹50 lakh, no tax is deducted, even if the overall value of the property exceeds ₹50 lakh. This interpretation goes against the legislative intent.
Amended Provisions
To address this issue, the following amendments are proposed:
- The consideration for the transfer of an immovable property will be the aggregate of the amounts paid or payable by all transferees to the transferor(s).
- If the total consideration and the stamp duty value of the property are both less than ₹50 lakh, no TDS is required.
These amendments will take effect from October 1, 2024.
Amendment of section 194-IA.
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.”.
How to Pay TDS on Sale of Property:
Step 1: Log in to your account on the Income Tax e-filing portal. Select e-File > click on e-Pay Tax from the dropdown as shown below
Step 2: Click on ‘+ New Payment’
Step 3: Click on the proceed button on the tab ‘26QB- TDS on Property’ as highlighted below
Note: In the next few steps, you will have to add the following details:
- Add Buyer’s Details
- Add Seller’s Details
- Add Property Transferred Details
- Add Payment Details
Step 4: Add Buyer’s Details
All your details will be auto-filled, but you can also change them if needed. After entering the details, click on ‘Continue’
Step 5: Add Seller’s Details
Add all the details of the Seller like their PAN, address
Step 6: Add Property Details
Add all the property details like type, address and also the sale details like date of agreement, value etc. The tax amount will be calculated automatically. Once done, click on ‘continue’
Step 7: Add Payment Details
Select the payment mode and proceed to complete the payment. Once the payment is done, a challan will be generated.
The amendment to Section 194-IA ensures that TDS is deducted on the sale of immovable properties where the total consideration exceeds ₹50 lakh, even if individual payments are below this threshold. This change aims to close the loophole and ensure proper tax compliance in property transactions. The new provisions will be applicable from October 1, 2024, and taxpayers must take note of these changes to avoid penalties and ensure correct TDS deductions.
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