s.194-IA — Tax deducted on purchase of immovable property
A transferee paying a resident for immovable property other than agricultural land must deduct one per cent of the consideration or stamp duty value, whichever is higher, unless both are below fifty lakh rupees.
The higher of consideration and stamp duty value, and the both-less-than-fifty-lakh test, apply from 1 April 2022. The proviso aggregating the consideration of multiple transferors or transferees applies from 1 October 2024. The counterpart in the Income-tax Act, 2025 is serial 3(i) of the Table in section 393(1).
Income-tax Act, 1961
s.194-IA
Income-tax Act, 2025
s.393(1) Table serial 3(i)
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 194-IA of the Income-tax Act, 1961 requires any person, being a transferee, responsible for paying, other than a person referred to in section 194LA, to a resident transferor any sum by way of consideration for the transfer of any immovable property other than agricultural land, to deduct at the time of credit or payment, whichever is earlier, one per cent of the sum or the stamp duty value of the property, whichever is higher. Sub-section (2) exempts the transfer where the consideration and the stamp duty value are both less than fifty lakh rupees, and the proviso inserted with effect from 1 October 2024 aggregates the amounts paid by all transferees to all transferors where there is more than one of either. Sub-section (3) dispenses with the tax deduction account number requirement in section 203A. The Explanation defines immovable property as any land other than agricultural land or any building or part of a building, and from 1 September 2019 extends consideration to charges such as club membership, car parking, electricity, water and maintenance fees incidental to the transfer. Section 194-IC overrides this section for monetary consideration under a joint development agreement within section 45(5A). The counterpart in the Income-tax Act, 2025 is serial 3(i) of the Table in section 393(1), with aggregation in Note 1 and the threshold in Note 3.
What the provision does
Imposes one per cent withholding on the purchase of land or buildings, measured on the higher of price and stamp duty value, with a fifty lakh rupee threshold now tested on the aggregate of joint transferors and transferees. It does not apply to agricultural land, to compulsory acquisition under section 194LA, to consideration in kind, or to monetary consideration under a joint development agreement covered by section 194-IC.
Threshold questions
- Is the payer a transferee and the payee a resident transferor of immovable property other than agricultural land
- Are the consideration and the stamp duty value both below fifty lakh rupees, aggregating all transferors and transferees from 1 October 2024
- Is the payment a sum of money, as opposed to consideration in kind such as constructed area
- Does section 194-IC apply instead because the payment is monetary consideration under a joint development agreement within section 45(5A)
- Have incidental charges such as parking, club and maintenance fees been included in the consideration
In practice
The recurring disputes.
Corpus paid by a developer to a society in redevelopment
The Revenue's argument is that the society transfers an interest in its land, the right to construct, to the developer as transferee for a sum of money, so the corpus attracts one per cent above the threshold. The developer's argument is that the society keeps its title and grants only a licence to enter and build, so there is no transfer of land or of a building or part of a building to the developer, and that the extended meaning of transfer in section 2(47)(v) belongs to the capital gains computation, not to this section. No decision on the point was traced, and cautious developers deduct and leave the society to claim credit.
Monthly displacement payments and consideration in kind
The Mumbai Tribunal held in Shree Jalaram Builders in April 2022 that the section is not at all applicable to monthly payments to society members for alternate accommodation, reversing a Commissioner (Appeals) who had applied it. Constructed area given to members is consideration in kind and not a sum; the Bangalore Tribunal in BBMP held under section 194LA that the words any sum confine the provision to money and that development rights certificates are not payment by any other mode, reasoning that applies equally here. The Revenue's argument that the stamp duty value of rehab flats is consideration has no support in the words of the 1961 section; whether the wider words any consideration in serial 3(i) of the Table in the 2025 Act reach consideration in kind has not been tested.
Purchase of transferable development rights
The Revenue's argument is that TDR is an interest in land, treated as a conveyance by the stamp law, and so immovable property within the Explanation. The developer's argument is that the Explanation defines immovable property as land or building or part of a building, and that the Mumbai Tribunal in Shafaa Construction held FSI cannot be treated as land itself for section 50C. No decision or Board clarification under this section was traced, and most purchasers deduct as a precaution.