Abhiman M 18 August 2023

How to deal with new sale deed when the property was bought before tds rule exists and now selling

Hi, I have a question on TDS on sale of property. Would really appreciate your help.

*Scenario:*

Party-A bought a 2bhk from a builder in 2011 for 53L and got possession in 2016 but didn't register the property.

Party-A, the original buyer/assignor is now selling it for 86.5L and assigning their rights to a buyer, Party-B through an assignment agreement.

Party-B wants the sale deed to show the total amount they are paying to Party-A.

When Party-A requested the builder's lawyer to mention this 86.5L in the sale deed, Builder's Lawyer suggested to contact a CA/Auditor on how the TDS should be shown in the sale deed because Party-A already paid 53L between 2011 to 2016 to the Builders without deducting any TDS as the TDS rule was brought in between in 2013.

Now the new buyer, Party-B would be paying 86.5L to Party-A so Auditor to advise how to deal with this TDS as Registration would be done by Developer but the money is being paid by buyer (Party-B) to seller/assignor (Party-A) since Party-A already paid all the money to Developers incl. transfer fees.

The current language in the new Sale deed says the money 53L paid by Party-A to Builders has been reimbursed by Party-B so the Party-A is assigning their rights to Party-B so Party-A is signing consenting witness during the property registration and just mentions the date of assignment agreement without referring to the amount paid by the Party-B to Party-A.

*The question is,* who should pay how much TDS to whom and what's the best way to deal with the TDS delay as the TDS rule came into effect in between and what should the sale deed language look like. When the registration is being done by Builders, will the sub registrar register the property if TDS is deposited in Party's PAN and not deposited in the Builder's pan? ‎

Thanks and Regards

Abhi

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2 Replies

Chetan Parmar 18 August 2023

but based on the scenario you've provided, here's a general understanding:

TDS on Sale of Property in India:
- As per provisions of the Income Tax Act, 1961 in India, a buyer is required to deduct TDS when buying a property. The rate is 1% if the sale consideration of the property is more than or equal to Rs. 50 lakh. The buyer has to deduct this TDS before making the payment to the seller and deposit the same to the government.
Transaction Overview:
- Party-A has essentially made a capital gain on selling the property rights to Party-B, considering they purchased the property for 53L and are selling it for 86.5L.
- Party-B will be making the payment of 86.5L to Party-A. Hence, based on the TDS provisions, Party-B would have to deduct TDS on this amount.
TDS on Payments Made Before 2013:
- Since Party-A made payments to the builder before the TDS rule was introduced in 2013, those transactions are not bound by this rule. Only the present transaction between Party-A and Party-B should be subject to the TDS rule.
TDS Payment and Documentation:
- Party-B should deduct 1% TDS from the 86.5L (or the applicable rate based on the current laws and considering the parties involved) and deposit this to the government under Party-A's PAN.
- Upon depositing the TDS, Party-B will receive a TDS certificate which should be provided to Party-A as proof of deduction and deposit.
- The sale deed should ideally reflect the correct transactional amount and the TDS deduction and payment details.
Registration Concerns:
- If the builder is facilitating the registration, it is essential to ensure that the transaction is transparent and reflects the true nature of the sale. The sub-registrar will be mainly concerned with the proper payment of stamp duty and registration charges. The TDS compliance is a separate matter handled by the tax department.
- As long as the TDS is correctly deducted and deposited, and the necessary TDS certificates are obtained, the registration should not be impacted by whose PAN the TDS is deposited under. However, it's crucial to clarify this with a local legal expert familiar with property registration procedures in your specific jurisdiction.
Consultation:
- Given the complexities and significant amounts involved, it's highly recommended to consult with a chartered accountant and a property lawyer in India. They can guide you through the TDS compliance and ensure that the sale deed is appropriately drafted.

Remember, while this gives an overview based on the details provided, each situation can have nuances that might affect the appropriate legal and tax steps to be taken. Always consult with professionals for specific guidance.

T. Kalaiselvan, Advocate (Advocate) 19 August 2023

Expert Mr. Chetan Parmar has given a clear explanation of the situation as well has given proper opinion as well as the suggestions to move on.

As far as B is concerned, he is the buyer, and he is buying the property which is valued above Rs. 50Lakhs, hence it becomes his duty to deduct the TDS @1% of the sale consideration amount and remit the same to the government within one month from the date of deduction

The buyer cannot dance to the tunes of the seller which is violating the law of the land.