No TDS u/s 194-IA if Individual Share in Joint Property Purchase is Below ₹50 Lakhs

No TDS u/s 194-IA if Individual Share in Joint Property Purchase is Below ₹50 Lakhs

Issue

Whether the statutory threshold of Rs. 50 Lakhs for deducting Tax Deducted at Source (TDS) under Section 194-IA applies to the total consideration of the property or to the individual share of each buyer in the case of a joint purchase.

Facts

• The Transaction: The assessee purchased a flat jointly with another person from M/s Homeland Buildwell Pvt. Ltd.

• Consideration: The total purchase consideration for the flat was Rs. 86,50,000/-.

• Share of Assessee: The assessee’s specific share in the consideration was Rs. 43,25,000/- (i.e., 50% of the total).

• AO’s Action: The Assessing Officer (AO) held the assessee to be an “assessee in default” under Section 201(1)/201(1A). The AO’s view was that since the total value of the property exceeded Rs. 50 Lakhs, TDS @ 1% was mandatory under Section 194-IA.

• Assessee’s Defence: The assessee contended that Section 194-IA is attracted only if the consideration paid by the purchaser exceeds Rs. 50 Lakhs. Since his individual share was only Rs. 43.25 Lakhs, the provision was not applicable. Reliance was placed on the Jaipur ITAT decision in Smt. Sandhya Gugalia vs. DCIT.

Decision

• The Income Tax Appellate Tribunal (ITAT) allowed the appeal and quashed the orders passed by the lower authorities.

• The Tribunal accepted the legal position that in the case of joint ownership, the threshold limit of Rs. 50 Lakhs under Section 194-IA must be applied to the individual share of each purchaser and not the total value of the property.

• Since the assessee’s share (Rs. 43.25 Lakhs) was less than the prescribed limit, he was not under any obligation to deduct TDS. Consequently, he could not be held as an assessee in default.

Key Takeaways

• Per-Purchaser Threshold: For Section 194-IA, the limit of Rs. 50 Lakhs applies qua each transferee (buyer). If a buyer’s share is below this amount, they are not liable to deduct TDS, even if the total property value exceeds Rs. 50 Lakhs.

• Joint Ownership Planning: This ruling confirms that co-owners can save on TDS compliance burdens if their respective contributions fall below the statutory threshold.

• Section 201(1) Liability: Interest and penalty proceedings for non-deduction of TDS (Section 201) automatically fail if the primary liability to deduct tax (Section 194-IA) is proven to be non-existent.