Payment of TDS incase of buying rights of a under construction property are transferred to another

This query is : Resolved

Ramesh Naik (Querist)
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03 October 2025 A apartment is fully constructed and a allottee has paid to builder about 90 percent of purchase price to builder and property is not yet registered in name of allottee..now the as per assignment deed between builder and allottee he is transferring rights to buy to another buyer. the allottee is taking original booking amount paid to builder and plus premium which totals to appx rs two crores. the allottee says he has DEDUCTED TDS of appx rs 1,21,000/- till date for all payments made to builder and he wants this amount to be paid to him by new buyer. but new buyer has paid entire rs. two crores to allottee by cheque as per tripartite agreement and not a single rupee to builder. is this legal or not. what are implications of tax law to new buyer if TDS is not done to PAN of allottee for rs two crores paid. please clarify as per latest guidelines.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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03 October 2025 As per Section 194-IA of the Income Tax Act (2025 rules), the buyer of any immovable property (value over ₹50 lakh) must deduct TDS at 1% of the transaction value and deposit it against the PAN of the seller to whom payment is made.

In this case, the new buyer paid the full ₹2 crore (including original booking + premium) to the allottee only and nothing to the builder. Therefore, the new buyer is required to deduct TDS on the entire ₹2 crore paid to the allottee and deposit it against the allottee’s PAN.

Any previous TDS done by the first allottee against payments to the builder cannot be claimed by or transferred to the new buyer, nor does it reduce the new buyer’s TDS obligation for the premium paid directly to the allottee. The new buyer’s liability is separate and based on the transaction between the new buyer and the allottee.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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03 October 2025 If the new buyer fails to deduct TDS at the time of payment to the allottee, the following can apply:

The new buyer will be treated as an “assessee in default” for the TDS amount not deducted.

Interest at 1% per month from the date of payment till deposit of TDS will be charged.

A late filing fee (₹200 per day, capped at the TDS amount) is also applicable if Form 26QB is not filed on time.

There is a risk of a penalty ranging from ₹10,000 to ₹1,00,000 under Section 271H of the Income Tax Act.

The allottee may not get credit for TDS unless it is properly deposited and reflected in Form 26AS against the correct PAN.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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03 October 2025 It is not correct for the new buyer to reimburse old TDS deducted by the first allottee on builder payments, since that TDS applied to a different transaction between allottee and builder. The new buyer must deduct TDS for all payments made to the allottee, deposit the TDS with the government as required by Section 194-IA, and quote the allottee’s PAN. Failure to do so can result in penalties, interest, and loss of credit for both buyer and seller as per the latest rules.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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03 October 2025 Good Luck.....

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