TDS at 1% of stamp duty value of property

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The Union Budget has introduced a provision 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.

Section 194-IA of the Act provides for deduction of tax on 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) 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) provides that no deduction of tax shall be made where the consideration for the transfer of an immovable property is less than Rs 50 lakh.

As per the provisions of the said 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 per the provisions of section 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 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.

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.

This amendment will take effect from April 1, 2022.

(Sanjeev Sharma can be reached at sanjeev.s@ians.in)

20220201-210804

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