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U.Narasimha   08 September 2016

Tds applicable on sale of under construction plot

my father  is 84 years old  and is a  retired PSU employee, he  is selling an under construction  plot of value  more than Rs 50 lacs which is self acquired and he is the sole owner, he does not have any regular source of income,will he be liable to pay 1% TDS and if so can he claim refund


 4 Replies

M.R.K.PRASAD-Advocate (SELF)     08 September 2016

TDS on sale of property above Rs 50 lakh is ompulsory.. And regarding refund capital gain has to be calculated. Consult your Tax planner..

Kumar Doab (FIN)     09 September 2016

Show all relevant docs to your ITax consultant.

Ms.Usha Kapoor (CEO)     10 September 2016

Dear Client,

When was the rule introduced and why? 

From 1st June 2013 the rule was introduced for compulsory tax deduction( TDS or withholding tax)  by a buyer of an immovable property (other than agricultural land) valuing Rs. 50 lakh or more. This rule also covers the property purchased through home loan.  It also has to paid when the buyer buys an under construction and part payment is done. TDS is deducted on Fixed Deposits,Salary etc. To know more about TDS or Tax Deducted at Source one can read our article Basics of Tax Deducted at Source or TDS

It comes under the  Sec 194 IA, the Income Tax Act 1961. Section 194-IA is applicable to all including relatives, minor, senior citizens etc. However, if transfer is a gift, then one does not have to pay TDS. The main objective for introducing this rule is to track all the high value real estate transactions which were not being registered. Tax so deducted should be deposited to the Government Account online  through any of the authorized bank branches using the e-Tax payment option available at NSDL.


The rate at which the buyer needs to deduct tax is 1% and it may go up to as high as 20% if the seller does not disclose his PAN. If the property  purchased is for Rs. 70 Lakhs then one needs to pay tax on full amount i.e 70 lakh not only on amount more than 50 lakh i.e. Rs. 20 Lakhs. In this example if buyer knows PAN of seller then buyer would need to submit TDS  @1% of 70 lakh i.e 7 lakh. Note unlike the Self assessment Tax ,No surcharge and education cess is applicable while deducting tax on sale of property. 

What if buyer does not pay TDS?

If TDS is not paid then interest and penalty would be imposed on the buyerInterest will be charged at the rate of 1% per month or part of the month

Ms.Usha Kapoor (CEO)     10 September 2016

If you can afford tell your father to gift thi sproperty to you and get the gift Deed registered in your name so as to claim exemption of full Income Tax/gift tax.Your father is bound to pay 1% TDS although he has no other source of income and h eis  asenior Citizaen and 84 years old. Read my above discussion -you'd understand.

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