No TDS Applicable Even on Properties Worth Over ₹50 Lakhs: Major Ruling by ITAT..

Typically, when purchasing a property worth more than ₹50 lakh, the buyer is required to deduct 1% TDS (Tax Deducted at Source). This rule is applicable under Section 194-IA of the Income Tax Act. However, a recent ruling by the Income Tax Appellate Tribunal (ITAT), Ahmedabad, has provided significant relief regarding this rule.

**What Happened in the Case?**
This case involves *Hasmukhbhai Jayantibhai Patel vs. ITO*, wherein the buyer purchased a property with a total value exceeding ₹50 lakh, but which was jointly owned by multiple sellers. Since the amount received by each seller was less than ₹50 lakh, the buyer did not deduct TDS. However, the Tax Department deemed this incorrect, declared the buyer to be in default, and issued an order to recover approximately ₹13.5 lakh in taxes and interest.

**What Did the ITAT Say?**
Overturning the Tax Department's decision, the ITAT Ahmedabad ruled in favor of the buyer. The Tribunal stated that, for the relevant Assessment Year (AY 2015-16), the ₹50 lakh threshold should be evaluated on a per-seller basis, rather than based on the aggregate value of the entire property. Since the payment made to each seller was less than ₹50 lakh, the deduction of TDS was not mandatory.

**The Rationale Behind the Verdict**
The Tribunal clarified that, under the laws prevailing at that time, there was no provision mandating that payments made to all sellers be aggregated for the purpose of assessment. Furthermore, the amendment introduced in 2024 will apply to future cases only, and not to retrospective cases.

**Tax Demand Quashed**
Following this ruling by the ITAT, the tax demand of ₹13.5 lakh imposed on the buyer—along with the accrued interest—has been completely set aside, providing the buyer with substantial relief.

**What Does This Mean for Homebuyers?**
This verdict holds particular significance for individuals who purchased property before April 1, 2024, in transactions involving multiple sellers. In such instances, if the payment made to each seller was less than ₹50 lakh, the requirement for TDS deduction will not apply. 

The Rules Have Now Changed
However, the rules have now changed. Effective April 1, 2024, the threshold of ₹50 lakh will apply to the total value of the entire property. This means that if the total value exceeds ₹50 lakh, the deduction of TDS will be mandatory, regardless of whether payments were made to multiple sellers. This ruling by the ITAT brings relief to homebuyers regarding past cases. However, under the new regulations, tax compliance has become stricter; therefore, it is crucial to understand the current rules when purchasing property.

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