TDS on Purchase of Immovable Property: Old Framework vs. New Simplified Regime
Introduction: Tax Deduction at Source as a Revenue Collection Mechanism
Tax Deduction at Source (TDS) remains one of the most significant mechanisms through which the Government of India collects tax revenue at the point of transaction. Rather than waiting for assessees to voluntarily remit taxes at year-end, the TDS framework ensures real-time collection by placing the responsibility on the payer to deduct and deposit tax before making payment.
Under the Income Tax Act, 1961 (hereinafter referred to as the "Old Act"), Chapter XVII governs the collection and recovery of tax. Part-B of Chapter XVII specifically deals with deductions at source, with individual provisions spread across Section 192 through Section 196D — each section addressing a distinct category of payment.
The newly enacted Income Tax Act, 2025 (hereinafter referred to as the "New Act") takes a markedly different approach. Instead of maintaining separate sections for each payment type, the New Act consolidates TDS provisions under Section 393, presenting a unified Table that specifies applicable rates for different categories of payments. This structural shift is intended to reduce complexity and improve compliance.
Immovable property transactions occupy a particularly important position within this TDS framework, given their high transaction values and their potential for tax evasion. This article examines the TDS provisions applicable to immovable property purchases — both under the Old Act and the New Act — covering threshold limits, compliance requirements, multiple buyer/seller scenarios, non-resident transferors, and the transformative simplifications introduced for post-October 2026 transactions.
TDS on Immovable Property Under the Old Act
Section 194IA — Deduction at Source for Resident Transferors
Section 194IA of the Old Act governs TDS obligations arising from the transfer of immovable property where the transferor is a resident of India. It is crucial to note at the outset that where the transferor is a non-resident, the provisions of Section 194IA do not apply. Such transactions fall under the purview of Section 195 of the Old Act, which carries its own distinct compliance requirements discussed separately below.
The obligation to deduct tax under Section 194IA rests with the transferee — i.e., the person purchasing or acquiring the immovable property.
Threshold Limit and Computation of Consideration
Sub-section (2) of Section 194IA specifies that the liability to deduct TDS is triggered when the consideration for the transfer of immovable property equals or exceeds Rs. 50 Lakhs. However, this threshold operates in conjunction with the Stamp Duty Value (SDV) as notified by the concerned State Government.
Consider the following scenario:
Illustration: Mr. Sharma purchases a residential flat for an agreed consideration of Rs. 45 Lakhs. However, the Stamp Duty Value of the same property as assessed by the State Government is Rs. 55 Lakhs. Since the SDV exceeds Rs. 50 Lakhs, TDS under
Section 194IAis applicable, and the TDS must be computed on Rs. 55 Lakhs — not on the lower agreed consideration.
This provision prevents under-reporting of transaction values for the purpose of evading TDS obligations.
What Constitutes "Consideration"?
The scope of "consideration" under Section 194IA is broad and encompasses not merely the basic sale price but also all incidental charges associated with the transfer, including:
- Club membership fees
- Car parking fees
- Utility facility charges
- Maintenance fees
- Advance fees
- Any other amount that is incidental to the transfer of the immovable property
This ensures that the TDS base cannot be artificially reduced by unbundling the transaction value across multiple charge heads.