Friday, October 22, 2021
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TDS applicability in case of exchange of flats

I want to exchange my present flat with a even bigger flat. My flat is valued at Rs. 50 lakhs whereas the other flat is valued at Rs. 85 lakhs so I will have to fork out more Rs. 35 lakhs for this trade. Remember to tutorial me no matter whether I have to deduct tax on 85 lakhs or I do not have to deduct any tax as the volume payable by me is under the threshold of 50 lakhs?

This is a bit intricate. As per Section 194IA of the Money Tax Act, a purchaser of an immovable house is necessary to deduct tax at supply @ 1% if the thought for the assets is 50 Lakh or extra. The tax is required to be deducted at the time of payment or at the time of credit rating. In your circumstance the price of the even bigger flat is Rs. 85 lakhs so it can be argued that the thought for the trade is Rs. 85 lakhs which is going to be discharged in two areas. 

The initially part of the consideration is Rs. 50 lakhs in the form of your existing flat and the harmony Rs. 35 lakhs in the form of income. So as significantly as the situation of threshold is worried, you are included below Area 194IA and expected to deduct tax. 

However, as the segment also takes advantage of the words and phrases “at the time of payment of these types of sum” in my view, your obligation to deduct tax is restricted to 1% on Rs. 35 lakhs and not on the whole of the sale consideration. Opposite view is also attainable and one can argue that since the amount payable is less than Rs, 50 lakhs, you are not required to deduct any tax. 

Because the seller eventually will get the credit history for tax deducted by the purchaser, I would advise you to enjoy protected and deduct tax @ 1% on Rs. 35 lakhs the sum which you are paying. It is in your possess curiosity to take a conservative solution in tax matters and stay away from currently being adventurous specially when it is not likely to hurt the other get together also.

Balwant Jain is a tax and expenditure specialist and can be reached on and @jainbalwant on his Twitter cope with.

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