Changes in TDS on Sale of immovable property in Budget 2019 u/s 194IA of Income Tax Act

By | July 6, 2019
(Last Updated On: July 6, 2019)

Changes in TDS on Sale of immovable property in Budget 2019

Finance Bill 2019 Proposed to change Section 194IA of Income Tax Act with effect from the 1st day of September, 2019:

Read Section 194IA Income Tax : Payment on transfer of certain immovable property other than agricultural land

Section 194IA Income Tax Changes in Budget 2019 Speech

Consideration for TDS on immovable property: It is proposed to provide that for the purpose of tax deduction at source from payment made for acquisition of immovable property, consideration shall include other charges in the nature of club membership fee, car parking fee, electricity and water facility fee, maintenance fee, advance fee or any other charges of similar nature which are incidental to the purchase of immovable property.

Relevant Clause of Finance Bill 2019 forChanges in TDS on Sale of immovable property

Clause 45

Amendment of section 194-IA.

In section 194-IA of the Income-tax Act, in the Explanation, after clause (a), the following clause shall be inserted with effect from the 1st day of September, 2019,––

‘(aa) “consideration for immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property;’.

Explanation of Clause 46 of Finance Bill 2019 on Section 194N Income Tax Act

Clause 45 of the Bill seeks to amend section 194-IA of the Income-tax Act relating to payment on transfer of certain immovable property other than agricultural land.

Sub-section (1) of the said section provides for tax deduction at source at the rate of one per cent. on the amount of consideration paid for transfer of immovable property. Sub-section (2) provides that the tax deduction at source shall not be applicable where the amount of consideration does not exceed fifty lakh rupees.

It is proposed to amend the Explanation to the said section to clarify the expression “consideration for immovable property” to include all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property.

This amendment will take effect from 1st September, 2019.

Why Section 194IA Income Tax Changes

As per Memorandum explaining Finance Bill 2019 ( Dated 05.07.2019)

TDS at the time of purchase of immovable property
Section 194-IA of the Act relates to payment on transfer of certain immovable property other than agricultural land and provides for levy of TDS at the rate of one per cent. on the amount of consideration paid or credited for transfer of such property. The term ‘consideration for immovable property’ is presently not defined for the purposes of this section. It is noted that in the transaction involving purchase of immovable property, there are other types of payments made besides the sales consideration and the buyer is contractually bound to make such payments to the builder/seller, either under the same agreement or under a different agreement. Some of such payments are those for rights to amenities like club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee etc. Accordingly, it is proposed to amend the Explanation to said section and provide that the term “consideration for immovable property” shall include all charges of the nature of club membership fee, car parking fee, electricity and water facility fees, maintenance fee, advance fee or any other charges of similar nature, which are incidental to transfer of the immovable property.
This amendment will take effect from 1st September, 2019.
[Clause 45]

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