What this TDS tweak in real estate transaction mean for home buyers and sellers

Currently, the TDS is deducted basis only on the consideration value of the immobile properties.

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In Budget 2022, the finance minister proposed that at the time of buying a property, one per cent TDS )Tax Deduction at Source) will apply on a non-agriculture immovable property of over 50 lakh on the basis of the sale price or the stamp duty value, whichever is higher, after an amendment in the Income Tax Act.

Currently, the TDS is deducted basis only on the consideration value of the immobile properties. Finance Minister Nirmala Sitharaman on Tuesday proposed the amendment to do away with the anomaly in the law.

As per the Finance Bill, 2022, presented in Parliament,” Clause 56 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 for deduction of tax by any person responsible for paying to a resident any sum by way of consideration for transfer of any immovable property (other than agricultural land) shall at the time of credit or payment of such sum to the resident at the rate of one per cent. of such sum 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 immovable property is less than fifty lakh rupees.”

The bill further stated, “It is proposed to amend sub-section (1) of the said section to provide that the person responsible for paying to a resident any sum by way of consideration for transfer of any immovable property (other than agricultural land) shall at the time of credit or payment of such sum to the resident deduct tax at the rate of one per cent. of such sum or the stamp duty value of such property, whichever is higher, as income-tax thereon. It is further proposed to amend sub-section (2) of the said section to provide that no deduction of tax shall be made where the consideration for the transfer of immovable property and the stamp duty value of such property, are both less than fifty lakh rupees. 

“Tweak in TDS norms on sale of immovable property will help contain tax evasion as it would reflect in Form 26AS of both buyers and sellers. If there would be any mismatch, then the income tax department may chip in find out the offender in such case,” said Balwant Jain, Mumbai-based tax and investment expert.

Pankaj Mathpal, MD & CEO at Optima Money Managers said,” TDS tweak in real estate transactions is to contain evasion of long term capital gain by sellers. Earlier, TDS was charged on the net money exchange or agreement value whereas now it will be decided on the stamp duty paid. So, if the stamp duty paid on a real estate transaction is 50 lakh or more whereas the net money exchanged is less than 50 lakh, even in that case 1 per cent TDS will be levied.”

It is also proposed to insert clause (c) to the Explanation to define “stamp duty value”.

In case the consideration paid for the transfer of immovable property and the stamp duty value of such property are both less than 50 lakh, then no tax is to be deducted under section 194-IA, it added.

These amendments will take effect from 1st April 2022.

 

 

 

 

 

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