New TDS rule on property purchases over Rs.50 Lakh: Implications for Buyers and Sellers

 

A 1% TDS will apply to property purchases exceeding ₹50 lakh, regardless of the number of buyers or sellers involved, starting from October 1. Under

Under a new amendment proposed in Budget 2024, a 1% Tax Deducted at Source (TDS) will apply to the purchase of immovable property (excluding agriculturalland) from a resident seller if the total transaction value exceeds ₹50 lakh. This rule applies regardless of whether there are multiple buyers or sellers,

The TDS will be calculated based on either the purchase price or the stamp duty value, whichever is higher. The new provision, which takes effect from October 1, aims to close a loophole where buyers interpreted the rule as applicable only to individual contributions rather than the total consideration.

The explanatory memorandum highlights that some taxpayers have been avoiding TDS by paying less than ₹50 lakh each, despite the total property value or stampduty exceeding ₹50 lakh. The amendment clarifies that the total consideration for the property must be considered when calculating TDS.

Tax experts caution that buyers need to be aware of this change due to the significant penalties for failing to deduct and deposit TDS correctly.In addition to the TDS deduction and deposit, buyers must also issue TDS certificates through the Income Tax Department’s e-portal (TRACES). This update will likely increase the compliance burden for property buyers.

The new rule aims to ensure that all property transactions involving significant sums are subject to appropriate tax deductions, preventing potential evasion and increasing transparency in property dealings.



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