A 1% TDS applies to property purchases exceeding Rs 50 lakh, even if there are multiple parties involved in the transaction.

Mumbai: For the property purchase of immovable property (excluding agricultural land) from a resident seller valued over Rs. 50 lakh, a TDS of 1% will be applicable, even if there are multiple buyers and each buyer’s contribution is less than Rs. 50 lakh. The same rule applies when there are multiple sellers, where each seller’s share is below Rs. 50 lakh, but the total sale price exceeds Rs. 50 lakh.

The 1% TDS will be calculated on either the property purchase price or the stamp duty value, whichever is higher. This amendment, proposed in Budget 2024, will take effect from October 1.

The explanatory memorandum highlights that some taxpayers have been interpreting the law as requiring TDS only on each individual buyer’s payment, rather than the total consideration paid for the property. This misinterpretation has led to situations where no tax is deducted if each buyer pays less than Rs. 50 lakh, even if the property’s total value exceeds Rs. 50 lakh. The memorandum clarifies that this is not the legislature’s intention.

To address this, it is proposed to amend sub-section (2) of section 194-IA of the Act to make it clear that in cases with multiple buyers or sellers, the total consideration paid by all buyers to all sellers should be considered.

Tax experts warn buyers to be aware of this change, as failing to deduct and deposit TDS can result in significant penalties. Besides deducting and depositing the TDS, buyers must also issue TDS certificates, generated on the I-T department’s e-portal (TRACES). This amendment will increase the compliance burden for buyers.