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TDS on Property

Manish Agrawal


Dear All,

Greetings from Manish!

We need a clarification under sec 194 IA of Income Tax Act, which says Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon.

Now my question is here s follows

I have booked a flat for Rs 90,00,000/- as on 02.02.2014 and paid the resident seller a sum of Rs 25,00,000/- on same day as booking advance and balance of Rs. 65,00,000/- as on 10.05.2014. (Which mean payment has been done under two different Tax period) As per Income Tax Act we have to deducted Rs. 90,000/-  (1% of 90,00,000/-) on the day of first payment that is 02.02.2014 and remitted the payment the government through form 26QB.

Now my question arise is i have deducted TDS and Paid in the Assessment year 2014-15 and it will get credited in Form 26as of Seller in the assessment year 2014-15 itself. But property is being transfer on the final payment date that is 10.05.2014 that comes under Assessment year 2015-16.

How TDS on property will be considered in hands of seller for the assessment year 2014-15 and 2015-16?

Or,  I have to make the payment of TDS  at the time of final payment to the seller. if No, then what happens to the TDS amount paid to the government in case of Booking cancellation.

Rahul Rai


Hi Manish,

Please read this post to understand and answer your doubts completely. TDS on Purchase of immovable property Property guide


CA Sundeep Kamath


Hi Manish,

To simplify the your question,

194LA specifies the time of deduction of TDS based on payment of sale consideration. Irrespective of tranches  of payment, the question in fact is " wheather the consideration involved is Rs. 50 Lakhs and above or less"

Secondly, we people with accounting background get soo deeply routed in matching concept, that we try to match the taxes based on sale date of property, payment date of consideration and final the posession date.To clarify the accounting aspect of AY under which credit will appear, the accounting aspects will be broadly governed by Accounting Standard -7 ( Construction Contracts), and the proportionate revenue method will have to be taken in to account by the builder / the promoter as the case may be and in case of completed projects the principles laid down in Accounting standard -9 will apply.

The tranches in payment of sale consideration is not the absolute terms governing the sale to be absolute but also dermined based on the posession, certainity of payment, completion, statutory approvals of project etc.

In cases of booking cancellation ( in respect to property under construction), the advanced amounts will not be recognised as revenue until substancial portion of constrcution are completed as per Accounting standard-7. In case of completed construction projects, its only after raising of invoice the sale is absolute subject to provisions of AS-9.


Hope the doubts are clarified.



S Kamath


Manish Agrawal


Hi Friends,

Greetings for the day!

My discussion was not related to accounting policy or accounting standard.

We are just talking about time when TDS need to be deducted and to be paid to government as per income tax act. If you will see in our example very clear we have mention that total sale consideration is more then 50,00,000/- Rs. Hence TDS need to be deducted.

Now question arise is, we have to deduct TDS at the time of making advance payment to seller ie Rs. 25 lakhs as on 02.02.2014 or at the time of final settlement to seller as on 10.05.2014.

Waiting for a specific reply

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