Government Proposes To Tweak TDS Norms On Sale Of Immovable Property

One per cent TDS will apply on a non-agriculture immovable property of over Rs 50 lakh on the basis of sale price or the stamp duty value, which ever is higher, after an amendment in the Income Tax Act.

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

There is an inconsistency in the Income Tax Act regarding levy of Tax Deduction at Source (TDS).

Finance Minister Nirmala Sitharaman on Tuesday proposed the amendment to do away the anomaly in the law.

As per the Finance Bill, 2022, presented in Parliament along with the other Budget documents, the government proposes to amend Section 194-IA of the Income Tax Act, in order to remove inconsistency with Section 43CA and 50CA of the law.

This amendment, if done, will take effect from April 1, 2022.

Explaining the rationale behind the amendment, the Finance Bill said Section 194-IA of the Act provides for deduction of tax on payment on transfer of certain immovable property other than agricultural land.

The sub-section (1) 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) 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.

The sub-section (2) provides that no deduction of tax should be made where the consideration for the transfer of an immovable property is less than Rs 50 lakh.

As per the provisions, TDS is to be deducted on the amount of consideration paid by the transferee to the transferor, the document said.

"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," the document said.

Thus, there is inconsistency in the provisions of section 194-IA and sections 43CA and 50C of the Act, the ministry pointed out.

"In order to remove 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 one per cent of such sum paid or credited to the resident or the stamp duty value of such property, whichever is higher," the document said.

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