• Notification Date: 02.02.2022
• Notification No: N/A

TDS will be applicable on Property Sale for the Rise in Stamp Duty Value

According to Budget 2022, TDS will be charged on the payment made for purchasing an immovable property. Charges will be made based on the higher value of stamp duty or the actual sale value. At present, the tax deduction at source (TDS) is charged if the sale value of the immovable property exceeds Rs.50 lakh. The new tax rule attempts at bringing parity between the sale value that is allotted for TDS and the capital gains calculations. The property buyer is required to deduct TDS at the rate of 1% on the sale value during the payment made to the seller.

Tax Partner at People Advisory India, EY, Shalini Jain, has stated that the TDS charged as per the new tax rule, is based on the actual consideration or stamp duty value. It is based on whichever is higher to match the consideration for charging the capital gains. The main intention behind this step is to remove the disparity and inconsistency in the system. But the 10% buffer on actual consideration meant for ignoring the stamp duty value to calculate the capital gains has not been mentioned in the TDS provision. In the present situation, the capital gain might be calculated on the actual consideration while the TDS might be required to be deducted at a higher value. The stamp duty value is usually higher than the actual value. 

Under Section 194-IA of the Act, TDS will be deducted on the transfer of some immovable property, except agricultural land. This has been stated in the Memorandum to the Budget 2022. Sub-section (1) states that tax deduction will be applicable for any person who is paying to a resident by using the way of consideration of immovable property. The deduction will be made during the payment of the money to the resident at a 1% rate.

But this section does not consider the stamp duty value of the immovable property. The provisions of section 43CA and 50C of the Act states that the profits and gains from business as well as the capital gains are required to be taken into account for the calculation of income. There are inconsistencies in the provisions of the Act to a large extent.

Section 194-IA is required to be amended to solve these inconsistencies. It is required to be made sure that the TDS is deducted at a 1% rate on the amount paid to the resident or the stamp duty value, considering the higher one.