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Tata Capital > Blog > Loan for Home > Budget 2022: TDS on Sale of Immovable Property Must Consider Stamp Duty Value

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Budget 2022: TDS on Sale of Immovable Property Must Consider Stamp Duty Value

Budget 2022: TDS on Sale of Immovable Property Must Consider Stamp Duty Value

Finance Minister N. Sitharaman unveiled the Union Budget on 1st February 2022. While it invoked a lukewarm reaction, there was one announcement that drew the eyes of prospective homebuyers and those considering a home loan.

In the Union Budget, the finance minister proposed that when buying a property, the homebuyer should deduct TDS at the rate of 1%. This TDS is applicable on the amount paid to the seller or on the stamp duty value, whichever is higher. This new rule will apply to all non-agricultural, immovable property, where the selling price or the stamp duty is above Rs. 50 lakhs. 

This amendment will come into effect starting 1st April 2022. It aims to bring parity between Section 194 IA, 43 CA, and 50 C of the Income Tax Act, 1961.

So, why were these changes made and how does the Budget 2022 stamp duty amendment change things? Read this article to learn more.

What are stamp duty charges?

When registering your property with your local municipal office, you will have to pay stamp duty. Stamp duty is a mandatory tax the government levies on all property transactions under Section 3 of the Indian Stamp Act, 1899.

If you fail to pay stamp duty timely, you will bear penalty charges. So, before finalising your dream home, you must estimate your stamp duty. In such situations, a stamp duty calculator can be helpful. Enter your state, city, area code, and property value to estimate how much stamp duty you will have to pay.

Additional Read: How to Deduct TDS on Home Loan in India?

How was TDS deducted before the Union Budget 2022?

Earlier, as per section 194 IA of the ITA, the homebuyer was required to deduct TDS only on the value of the consideration paid. This amount includes the car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges that come with the transfer of the immovable property.

As per Sections 43CA and 50C of the ITA, if the immovable property was held as inventory, i.e., for selling at a higher value, TDS would be deducted on the sale value or stamp duty, whichever was higher.

So, the stamp duty value of the immovable property was not a factor while deducting TDS. Stamp duty value (Budget 2022not effective) was considered solely while calculating the profits.

Why was this amendment needed?

While the stamp duty value did not affect the TDS, it was a factor while calculating the capital gains or profits.

The TDS will now be applicable on the amount of consideration or the stamp duty value of your property, whichever is higher.

Additional Read: All you need to know about section 80C

In conclusion

With the new Budget, the government has tried to achieve consistency in the Income Tax Act.

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