TDS u/s 194 IA on resale property under construction

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This discussion clarifies the applicability of TDS under Section 194 IA for a resale under-construction property. The buyer is purchasing a flat for ₹85 lakhs, paying ₹25 lakhs to the original allottee and the remaining ₹60 lakhs directly to the builder. The key question is whether TDS needs to be deducted on the ₹25 lakhs paid to the original allottee, as this amount is below the ₹50 lakh threshold. The consensus is that TDS is applicable on both payments, as the total property value exceeds ₹50 lakhs and payments are made to two separate parties.

Anoop Campbell

Anoop Campbell (Querist)

13 August 2021 I am buying a builder flat under construction in resale from the original allottee. Total cost of the flat is 85 lacs. However the original alloteee has paid only 25 lacs till date to the builder. Transaction consideration between me and the original allottee is 25 lacs only and the flat will be transferred by the builder in my name. Balance 60 lacs will be paid by me directly to the builder as and when demanded. Am I required to deduct tax at source u/s 194 IA on payment of 25 lacs being paid to the original allottee?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

14 August 2021 Deduct TDS on both the payments including the builder payment.

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Anoop Campbell

Anoop Campbell (Querist)

14 August 2021 Thank you CA Sestharaman Sir. But if the consideration for the transaction between me and the original allotee is 25 lacs only and there is an agreement to sell to substantiate that why should 194IA be applicable as consideration between him and me is less than 50 lacs? I do understand that I will have to deduct TDS @ 1% on all subsequent payments that I will make to the builder.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

14 August 2021 Here the property value is more than 50 lacs and you are paying the amount to 2 parties. You need to deduct TDS on both the parties.

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Anoop Campbell

Anoop Campbell (Querist)

14 August 2021 Understood Sir. Thanks for explaining with such great clarity. Appreciate it.

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