No TDS on Property Deals Before 2024: ITAT’s Landmark Relief

No TDS on Property Deals Before 2024: ITAT’s Landmark Relief

 

Tribunal clarifies Section 194-IA interpretation

 

Buyers must note stricter rules post-April 2024

 

By Legal Reporter

New Delhi: April 21, 2026:

The Income Tax Appellate Tribunal (ITAT) Ahmedabad has ruled that for property transactions before April 1, 2024, buyers are not required to deduct TDS under Section 194-IA if each co-owner’s share is below ₹50 lakh, even if the total property value exceeds that threshold. This relief, however, does not apply after the Finance Act 2024 amendment, which mandates aggregation of the property value.

 

Analytical Overview

Background

• Section 194-IA of the Income Tax Act, 1961 requires buyers to deduct 1% TDS when purchasing immovable property valued above ₹50 lakh.
• The case in question: Hasmukhbhai Jayantibhai Patel vs ITO (ITAT Ahmedabad, March 27, 2026).
• The buyer purchased property jointly owned by multiple sellers. Each seller’s share was below ₹50 lakh, but the total exceeded ₹50 lakh.

Tax Department’s Stand

• The Assessing Officer treated the buyer as an assessee in default, raising a demand of ₹13.5 lakh plus interest.
• The Commissioner of Income Tax (Appeals) upheld this view, arguing that the threshold should be applied to the entire property value.

 

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ITAT’s Ruling

• ITAT overturned the decision, holding that:
  • Law prior to April 1, 2024, did not mandate aggregation.
  • Threshold must be applied per seller, not on the total property value.
  • Since each seller received less than ₹50 lakh, no TDS obligation arose.

Legal Reasoning

1. No aggregation clause existed in the law during AY 2015-16.
2. Finance Act 2024 amendment introduced aggregation, effective April 1, 2024.
3. Past rulings supported the taxpayer’s position.

Implications

• Pre-April 2024 transactions: Buyers dealing with multiple co-owners, each below ₹50 lakh, are not liable for TDS.
• Post-April 2024 transactions: Buyers must deduct TDS if the aggregate property value exceeds ₹50 lakh, regardless of individual shares.

 

Comparison Table: Old vs New Rule

 

 

 

[RESEARCH RESOURCES

 

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FAQs on Section 194-IA and ITAT Ruling

Q1. What is Section 194-IA?
It mandates buyers to deduct 1% TDS when purchasing immovable property valued above ₹50 lakh.

Q2. Does TDS apply if property value exceeds ₹50 lakh but each seller’s share is below ₹50 lakh?

• Before April 1, 2024: No TDS required.
• After April 1, 2024: Yes, TDS applies on aggregate property value.

Q3. What was the ITAT case about?
A buyer purchased property from multiple co-owners, each receiving less than ₹50 lakh. The tax department demanded TDS, but ITAT ruled in favor of the buyer.

Q4. Why did ITAT rule against the tax department?
Because the law at that time did not require aggregation of property value across sellers.

Q5. What changed after April 1, 2024?
The Finance Act 2024 amendment requires aggregation of property value. If the total exceeds ₹50 lakh, TDS must be deducted, even if individual shares are below the threshold.

Q6. What happens if buyers fail to deduct TDS post-2024?
They may be treated as assessees in default, face tax demands, penalties, and interest.

Q7. Does this ruling apply to all property deals?
No. It applies only to transactions before April 1, 2024. Post-amendment, stricter rules apply.

 

Key Takeaway

• Relief for past buyers: No TDS if each co-owner’s share was below ₹50 lakh before April 2024.
• Stricter compliance now: Buyers must deduct TDS if the aggregate property value exceeds ₹50 lakh.
• Practical advice: Always check the latest law before property transactions and consult a tax advisor to avoid penalties.