TDS norms on sale of immovable property to be tweaked: Government Proposes!

Union Budget 2022, announced by the Finance Minister Nirmala Sitharaman in Parliament and the other Budget documents, lays out a government proposal of amending Section 194-IA of the Income Tax Act with Section 43CA and 50CA the law.

As per the Union Budget 2022, one percent TDS will apply on a non-agriculture immovable property of over 50 Lakh INR based on the sale price or the stamp duty value, whichever stands higher. This follows after an amendment in the Income Tax Act. As of now, the TDS is deducted only on the consideration value of the immobile properties.

The current Income Tax Act is inconsistent with the levy of Tax Deduction at Source (TDS). Finance Minister Nirmala Sitharaman in the Union Budget proposed an amendment to remove the law’s anomaly. Further, in the Finance Bill, 2022, presented in conjunction with Budget documents, the government suggests amending Section 194-IA of the Income Tax Act. If done, the amendment will take effect from April 1, 2022.

In detail, the Finance Bill states Section 194 IA of the Act provides a tax deduction on payment on transfer of specific immovable property – agricultural land excluded.

The sub-section (1) provides for deduction of tax by any person responsible for paying a resident any sum by way of consideration for transfer of any immovable property(other than agricultural land) at the time of credit/payment of such sum to the resident at the rate of 1% of such sum income-tax thereon. The sub-section (2) of the same section stated that no tax deduction shall be made where the consideration for the transfer of immovable property is less than 50 lakh INR.

As per the provisions mentioned in the document, TDS must be deducted from the amount of consideration paid by the transferee to the transferor.

This section does not consider the stamp duty value of the immovable property. Whereas, as the provisions of section per 43CA and 50C of the Act, the stamp duty value will also be considered for computation of income under the head’s profits and gains from business or profession and capital gains, respectively.

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

Elaborating on the same, the document states that to remove inconsistency, the government has suggested amending Section 194-IA of the Act to state that in case of transfer of an immovable property (other than agricultural land), TDS will be deducted at the rate of 1% of such sum paid or credited to the resident/the stamp duty value of such property. Whichever is higher

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

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