Tds on immovable property u/s 194ia

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

19 February 2017 I am purchasing a property. There was an existent house which has got demolished and flats are being built in that land. There is a land agreement for 28 lakhs (for uds part) and construction agreement for 80 lakhs and both have been registered. The existing house has been demolished and construction is underway. As per 194IA, TDS is to be deducted if the sale consideration of property is greater than 50 lakhs and I have informed the builder on the same that I will deduct TDS on payment. However, his auditor's view is that land is the immoveable property which has been sold and is less than 50 lakhs and hence not applicable and also service tax has been paid on construction cost treating it as services. Please confirm whether TDS is applicable and I need to deduct 1% on the payments I make as the total consideration is greater than 50 lakhs.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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19 February 2017 TDS applicable you need to deduct TDS 1% on total consideration.

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Querist : Anonymous

Querist : Anonymous (Querist)

20 February 2017 I have checked this again with the builder's auditor. He says that Seller has sold the land to the flat purchasers through the builder using POA . All flat purchasers have got into a construction agreement for constructing the flat with the builder and have paid service tax on the construction agreement value. The immoveable property here is only land which is being sold for which consideration is less than 50 lakhs. The construction is going to happen after demolition of existing house of the seller and flats to be built in the land and the Seller does not have any ownership in any flat. So, they are insisting TDS is not applicable. Can you please recheck and confirm ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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20 February 2017 For TDS purposes the construction agreement value should also be taken in to account. I am keeping open the query for the opinion of other experts.

Querist : Anonymous

Querist : Anonymous (Querist)

20 February 2017 Thanks Seetharamanjii

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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20 February 2017 In my opinion auditors view is correct since there are separate registered documents for transfer of land and construction agreement. Moreover it is the land which is being sold and service tax is payable on construction part. Seller has no ownership in the built flat which is to be got build by the builder. The seller is only transferring the land whose value is less than 50 Lakhs and there is a separate registry to this effect. The construction part is to be taken care of by the builder and it is liable for service tax and does not amount to sale. Therefore in my view TDS is not applicable.

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