Tds on property
This query is : Resolved
30 June 2013
Hello Experts,
Please help me on the below queries:
1) I entered into a purchase agreement that was registered in May 2013. Will I have to cut TDS on total amount or on each installment paid to seller?
2) Please check if my below understanding is correct? ....I have taken a Bank Loan for the property purchase, so if the amount to be paid to seller is Rs.1000 (assumed) and consequently TDS is Rs.10, the Bank will disburse Rs.1000 to me and I will pay the seller Rs.990 while retaining Rs.10, which I shall deposit to govt. by the 7th of the month following the month of payment to seller.
Thank you..
Please help me on the below queries:
1) I entered into a purchase agreement that was registered in May 2013. Will I have to cut TDS on total amount or on each installment paid to seller?
2) Please check if my below understanding is correct? ....I have taken a Bank Loan for the property purchase, so if the amount to be paid to seller is Rs.1000 (assumed) and consequently TDS is Rs.10, the Bank will disburse Rs.1000 to me and I will pay the seller Rs.990 while retaining Rs.10, which I shall deposit to govt. by the 7th of the month following the month of payment to seller.
Thank you..
01 July 2013
Amount to be deducted is at the time of 'credit' or 'payment' which ever is earlier.
Since you have credited the amount in the transferor's account, by virtue of the agreement, on 31 st May 2013, TDS provisions as per section 194-IA is not applicable to you.
Since you have credited the amount in the transferor's account, by virtue of the agreement, on 31 st May 2013, TDS provisions as per section 194-IA is not applicable to you.
01 July 2013
Thanks for the reply. Is this true even if Loan has not been disbursed..
27 July 2025
Let me clarify the TDS on property purchase in your case:
---
### 1) **Whether TDS is to be deducted on total amount or each installment?**
* **TDS under Section 194-IA** applies on **payment of consideration for transfer of immovable property (other than agricultural land).**
* The TDS is to be deducted **at the time of payment or credit of each installment**, whichever is earlier.
* So, **if you pay in installments, TDS must be deducted on each installment separately at the time of payment or credit to the seller.**
---
### 2) **Regarding your understanding about bank loan and TDS deduction:**
* If the bank disburses Rs. 1000 to you, **you must deduct TDS on the amount you pay to the seller**.
* For example, if you pay Rs. 1000 to seller, you deduct Rs. 10 as TDS (1% of Rs. 1000) and pay Rs. 990 to the seller.
* You then deposit the TDS amount with the government within the prescribed time (generally 7th of the next month).
* This is **correct** as per Section 194-IA.
---
### 3) **Regarding the reply you got:**
> *"Since you have credited the amount in the transferor's account, by virtue of the agreement, on 31st May 2013, TDS provisions as per section 194-IA is not applicable to you."*
* This is **not correct**.
* The Supreme Court has held in cases that **TDS is to be deducted on payment or credit, whichever is earlier**.
* If you have not actually paid or credited the amount to the seller (i.e., the seller’s bank account), and only entered into agreement, TDS is not deductible just because of the agreement.
* The **loan disbursement to you is separate and not related to credit/payment to seller**.
* So, **if you have not paid or credited the amount to the seller, TDS is not deductible yet**, even if the agreement is registered.
---
### Summary:
| Situation | TDS Deduction Required? |
| ------------------------------------------------ | --------------------------------------------------------------- |
| Payment or credit to seller is made | Yes, deduct TDS @ 1% on amount paid/credited per installment |
| Only agreement signed, no payment or credit | No, no TDS deduction until payment/credit happens |
| Loan disbursed to buyer but no payment to seller | No, TDS deduction depends on payment/credit to seller, not loan |
---
### Let me know if you want me to explain more on:
* How to deposit TDS under 194-IA
* What documents/certificates to get from seller (PAN mandatory)
* Timelines and penalties for non-deduction
Happy to help!
---
### 1) **Whether TDS is to be deducted on total amount or each installment?**
* **TDS under Section 194-IA** applies on **payment of consideration for transfer of immovable property (other than agricultural land).**
* The TDS is to be deducted **at the time of payment or credit of each installment**, whichever is earlier.
* So, **if you pay in installments, TDS must be deducted on each installment separately at the time of payment or credit to the seller.**
---
### 2) **Regarding your understanding about bank loan and TDS deduction:**
* If the bank disburses Rs. 1000 to you, **you must deduct TDS on the amount you pay to the seller**.
* For example, if you pay Rs. 1000 to seller, you deduct Rs. 10 as TDS (1% of Rs. 1000) and pay Rs. 990 to the seller.
* You then deposit the TDS amount with the government within the prescribed time (generally 7th of the next month).
* This is **correct** as per Section 194-IA.
---
### 3) **Regarding the reply you got:**
> *"Since you have credited the amount in the transferor's account, by virtue of the agreement, on 31st May 2013, TDS provisions as per section 194-IA is not applicable to you."*
* This is **not correct**.
* The Supreme Court has held in cases that **TDS is to be deducted on payment or credit, whichever is earlier**.
* If you have not actually paid or credited the amount to the seller (i.e., the seller’s bank account), and only entered into agreement, TDS is not deductible just because of the agreement.
* The **loan disbursement to you is separate and not related to credit/payment to seller**.
* So, **if you have not paid or credited the amount to the seller, TDS is not deductible yet**, even if the agreement is registered.
---
### Summary:
| Situation | TDS Deduction Required? |
| ------------------------------------------------ | --------------------------------------------------------------- |
| Payment or credit to seller is made | Yes, deduct TDS @ 1% on amount paid/credited per installment |
| Only agreement signed, no payment or credit | No, no TDS deduction until payment/credit happens |
| Loan disbursed to buyer but no payment to seller | No, TDS deduction depends on payment/credit to seller, not loan |
---
### Let me know if you want me to explain more on:
* How to deposit TDS under 194-IA
* What documents/certificates to get from seller (PAN mandatory)
* Timelines and penalties for non-deduction
Happy to help!
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