No TDS deduction when each buyer pays less than Rs 50 lakh

 No TDS deduction when each buyer pays less than Rs 50 lakh

A recent ruling by ITAT Jodhpur Bench has brought much-needed clarity to property purchases by multiple buyers

In a recent ruling, the Jodhpur Bench of the Income Tax Appellate Tribunal (ITAT) clarified that tax deducted at source (TDS) under Section 1941A of the Income-Tax (I-T) Act is applicable only when the consideration for the transfer of immovable property is more than Rs 50 lakh per buyer.

Introduced by the government in 2013 to curb the use of black money in property transactions, Section 1941A requires the buyer to withhold tax at the rate of 1 percent of the consideration or the stamp duty value (SDV) of the property, whichever is higher, when a resident transfers an immovable property (other than agricultural land).

‘Consideration’ here includes the price paid for the immovable property and other charges, such as processing fees and external development charges.

Ending ambiguity

In the case presented to the Jodhpur bench, four individuals had jointly purchased an immovable property for a total consideration of Rs 1.26 crore. Each individual held one-fourth share of the property, which equated to a consideration of Rs 31.5 lakh per person. The assessing officer (AO) considered the purchase cost to be Rs 1.26 crore and applied Section 1941A. The AO held the assess to be in default and imposed fines under various sections of the Act. However, the bench ruled that in this particular case, Section 1941A of the Act cannot be invoked.

“The judgment is a step in the right direction and reinstates the intended view of the legislature that the threshold limit of Rs 50 lakh is to be evaluated for each assesses. The judgment will remove ambiguity in cases involving co-owners or joint owners of properties.

When does Section 1941A apply?                                                                                               

Section 1941A applies to transactions involving immovable property, which in this section refers to any land (other than agricultural land), any building, or part of a building. “The buyer must deduct TDS at the rate of 1 percent of the total considerations and deposits it with the government.

The buyer needs to have a valid Permanent Account Number (PAN). “The TDS needs to be a deducted at the time of giving credit, whichever is earlier.

Tax needs to be deducted if either the sale price or the SDV, whichever is higher, crosses Rs 50 Lakh and SDV is Rs 52lakh, and then Rs 52,000 needs to be deducted while making the payment of Rs 45 lakh.

Jain adds, “TDS must be deposited with the government within 30 days from the end of the month in which TDS was deducted, using Form 26QB.”

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