Stamp Duty Valuation is irrelevant for TDS on Immovable Property

Stamp Duty Valuation is irrelevant for TDS on Immovable Property
Stamp Duty Valuation is irrelevant for TDS on Immovable Property

Immovable Property

Query 1]

Last financial year, I had dealing of Double storied Building, 25 years old for sale price of Rs. 60 Lacs and provided Rs. 11 Lacs as advance on 28th March 2015 by cheque to the seller account and was ready for registry execution before 31st March 2015. Being the Land belongs to society on lease, the society and their board members conducted meeting leisurely and finally on 8th April gave membership confirmation and on 13th April 2015 conducted Registry for Rs. 60 Lacs purchase value.

And deposited 60,000/- as TDS on seller account on 06/05/2015 and not yet received form No. 16B. Later the Dy. registrar called on 14/5/2015 and informed the enhanced value at Rs. 68 Lacs as per new financial year 2015-16. Accordingly, I deposited extra stamp duty and other registration fee as per their instruction and then finally handed over the registration document on 23/05/2015. Please inform whether I have to deposit Rs. 8,000/- further to the seller account or not? Any other liability may arise, if any, may also be duly informe. [Er. H.K. Tiwari-]


The biggest share of direct tax revenue in the Government treasury comes through Tax Deduction at Source (TDS). Being easiest & biggest source of collection, Government also keeps on finding new avenues to bring more and more transactions under TDS net. “TDS on immovable property“under section 194-IA is an invention in that direction. This section is applicable w.e.f. 1st June 2013 & requires deduction of tax at source @ 1% on all payment against purchase of an immoveable property if the transactions value is of Rs. 50 Lacs or more. However, TDS needs to be done @ 20%, if the seller does not have a PAN or fails to furnish PAN to the purchaser.

The best part is that TDS has to be done on the actual consideration specified in the transfer documents, and is not on the basis of stamp duty valuation of the property. This deduction has nothing to do with the capital gains for the seller. So, even if the seller is not liable to pay LTCG tax for any reason whatsoever, buyer would still be required to deduct tax at source.

In your specific case, it may be noted that:

  1. TDS on immoveable property has to be done if the transaction value is Rs. 50 Lacs or more. For TDS purpose, actual transaction value is important and not the stamp duty valuation. Your purchase price was Rs. 60 Lacs only. You have correctly deducted & deposited 1% TDS in the government Treasury. You would not be required to deposit additional Rs. 8,000/- (i.e., 1% of Rs. 8 Lacs) as TDS in the account of seller as stamp duty valuation is not at all relevant for TDS purpose u/s 194-IA.
  2. Additional tax liability:
    a] In normal course, income-tax is payable on real income only. However, readers would be surprise to know that paying stamp duty on a higher valuation than the actual sale price has adverse tax impact for the purchaser also.
    b] By the Finance Act-2013, Section 56(2) has been amend so as to provide that if any individual or HUF purchases any immovable property for an inadequate consideration (i.e., if the stamp duty valuation of the property is more than the actual purchase price) and the difference between stamp duty valuation and actual purchase price is more than 50,000/-, then such difference shall be taxable in the hands of the purchasing individual or HUF as “Income from Other Source”. For this purpose, stamp duty valuation as on the date of agreement to sale could be considered if any part of the consideration is paid by the purchaser otherwise than in cash.
    c] After reading the above lines, taxpayers may rightly conclude that purchasing the property below the stamp duty value is also taxing now. Income tax is not always on actual income. Even purchasing property below stamp duty valuation could result in additional tax liability.
    d] In your specific case, you have purchased the property for Rs. 60 Lacs against which advance of Rs. 11 Lacs by cheque was given on 28th March 2015. However, the value adopted by the registrar for levy of stamp duty was Rs. 68 Lacs at the time of sale deed on 13th April 2015. The stamp duty value of the building as on 28.03.2015 would be relevant for computing notional income u/s 56(2). [In Maharashtra, change in ready reckoner value is effected from 1st January every year. As a result, probably the stamp duty valuation as on 28th March & 13th April would be same. If it so, Rs. 8 Lacs would be taxable as “Income from Other source” U/s 56(2).]

Query 2]

I have retired from service on 31.03.2015 and received retirement benefits. I would like to gift Rs. 10, 00,000/- to my wife do that my tax liability gets reduce. Please advice:

  1. Whether it is possible and if so how to execute the same?
  2. Whether I would be liable for any tax? []


Gift received by an individual from a relative is not subject to tax. Relative here doesn’t mean the relatives as referred to in the common parlance but includes only the following person:

(i)        spouse of the individual;
(ii)       brother or sister of the individual;
(iii)     brother or sister of the spouse of the individual;
(iv)     brother or sister of either of the parents of the individual;
(v)       any lineal ascendant or descendant of the individual;
(vi)     any lineal ascendant or descendant of the spouse of the individual;
(vii)    spouse of the person referred to in clauses (ii) to (vi).
In your specific case, you can gift the amount to your wife without any adverse income tax impact. For the purpose of Income Tax Act-1961, even gift done on a plain paper would suffice the purpose. Neither you nor your wife would be liable to pay the tax on the amount of gift.

However, the income of your wife from the gifted amount of Rs. 10 Lacs would not be taxable as her income. There is a clubbing provision in the Indian Income Tax Act-1961. As a result of clubbing provision, where an asset/property is transferre by an individual to his spouse or minor Child or Daughter-in-law, directly or indirectly, otherwise than for an adequate consideration, any income from such asset is deem to be the income of the transfer er by virtue of section 64(1A) / 64(1) (iv) / 64(1)(vi) of the Income Tax Act-1961. Effectively, even if Rs. 10 Lacs is gifted by you to your wife, still income therefrom would be treat as yours only & would be clubb with your other income.

Immovable Property 



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