TDS on sale of immovable property - implications on seller

I am planning to sell one immovable property i.e. residential apartment in Pune. The total agreement/sale value will be more than 50 Lacs. I heard that there is a section which mandates the buyer to deduct TDS @ 1% of sale value if value is more than 50 lacs. In such cases, from seller's perspective, if the property is held for more than 3yrs, will it be eligible for long term capital gains treatment with indexation? and if the sale proceed is invested in another residential property then is there any tax to be paid?  If no, then do we need to pay TDS during sale transaction? If paid, can this TDS be claimed for refund by seller while filing IT return? 
Asked 8 months ago in Income Tax from Pune, Maharashtra
Dear Sir,

Please find the answer below:

1. Yes, Section 194IA requires a buyer of immovable property(more than 50 LAcs) to dedcut TDS @1%.

2. Yes, it will be eligible for indexation and long term capital gain.

3. If you invest sufficient amount in other residential house property, you will be eligible for deduction and will not require to pay capital gain tax subject to  other consitions being satisfied.

4. Yes, buyer has to deducted TDS in any case.

5. Yes, you can claim the refund of TDS paid.

We shall be glad to help you in this regard.

Thanks and Regards,
CA Abhishek Dugar
caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
773 Answers
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Dear Sir,

TDS Deduction @ 1% is mandatory regardless of status of seller and taxability of the transaction in his hand.

Also note that if the house is hold for more than 3 Years it will be Long term gain working with indexation.

If the said proceedings invested in another house same will also be available as exemption.

Also to note that seller need to show the transaction in his return and can claim refund if no tax liability is there.

Vishrut Rajesh Shah
CA, Ahmedabad
194 Answers
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Yes there is a section where in the purchaser of the property should deduct 1% TDS of the consideration amount if the same is above 50 Lakhs.

Yes if the property is held for more than 3 years than it will be treated as long term capital gains and you can get indexation benefit.

If the sale proceeds r invested in purchase of new residential property then you can get exemption from capital gains tax.

The TDS deducted by purchaser can be claimed at the time of filing return of income.
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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Dear Sir,

1. As per Section 194IA of the Income Tax Act, the buyer of the property is required to deduct withholding tax i.e TDS @ 1% on purchase of Immovable Property if the Value is more than Rs.50 Lacs.

2. If the property is held for a period more than 3 years, then it will be considered as a Long term Capital gain and the seller can claim Indexation benefits.

3. If the amount of Capital Gain is invested to purchase another House Property then the Long Term Capital Gain Tax can be saved.

4. Yes, you can claim the TDS as Refund while filing your Income Tax returns if NO tax is payable by you.

Trust this clarifies your query. 

Feel free to get back/ call back for any further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
719 Answers
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Dear Sir, 

In Short, in your case

- TDS is required to be deducted by the purchaser
- You Can Claim the amount of TDS deducted while filing your Income Tax Return.
- Long term capital gain will arise and you can take benefit of same by investing the amount in new residential property within 1 year before or 2 years after sale/transfer of Property. But you would be required to hold the new property for 3 years from purchase date.

For any other query/ Clarification, feel free to contact:
ca.skagarwal@gmail.com
Shiv Kumar Agarwal
CA, Delhi
197 Answers
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There are several option available like investing in ur own start up, investing in a eligible manufacturing business. However all these option does not suit everybody. However, if u purchase any shop or commercial property then it will not be eligible for deduction. 

please find the suitable investment option below:

1. if you dont want to buy a residential property immediately, you can deposit the amount in CGDS scheme and purchase the residential  property within 2 years from the date of sale or construct the same within 3 years; or

2. You can invest in specified bonds. Two bonds has been specified by the govt. 


please let us know if you need any clarification on the above.

Thanks and Regards,
CA Abhishek Dugar
caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
773 Answers
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Income/loss of house property can be clubbed with the salary income.
Abhishek Dugar
CA, Mumbai
773 Answers
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Yes, you can claim exemptions u/s 54EC. However, in your case may be you would not prefer the same.

No benefit on purchase of Shop/ Office in your case.

Rental Income will be included in your Income. No Set off available.
In House property Income you can take benefit of Sec 24(a). No set off of Loss from House property with Salary Income.

For any other query/ Clarification, feel free to contact:
ca.skagarwal@gmail.com
Shiv Kumar Agarwal
CA, Delhi
197 Answers
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1. There is no other option but to pay tax and use it for any purpose you want

2. Rental Income from commercial property will be treated as income from house property and will be clubbed with Salary Income.
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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Dear Sir,

If you do not want to invest the funds in a residential property then you can invest the same upto a maximum of 50 Lacs in Govt Specified Bonds within a period of 6 months from the date of Sale. These bonds have a Lock in Period of 3 years.

If a Commercial Property is purchased then you would not get exemption and the rental income earned thereon will be considered as Income from House Property and taxed.

Trust this clarifies your query. 

Feel free to get/ call back for any further clarifications. 

Thanking You. 

Regards,
CA Rohit R Sharma
BCOM, ACA, LLB - GEN, CERT. FAFP
Rohit R Sharma
CA, Mumbai
719 Answers
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w.r.t your first two questions, let rohit and shiv deal with the same. 

w.r.t last question, if you use the sale proceeds to pre pay your loan, it will be eligible for the investment if that property was purchased one year before the sale of Pune property. if that property is more than one year old you can't claim the deduction.

Thanks and Regards,
CA Abhishek Dugar
caabhishekdugar@gmail.com
Abhishek Dugar
CA, Mumbai
773 Answers
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