Section 194IA v/s 194 M

[Ethirajan Parthasarathy]

Booking for an apartment in ongoing project is always referred to as “Purchase of Apartment” from the developer.

In this context, it has become common practice for the flat buyer to deduct tax @ 1% u/s 194IA. However, for purpose of time limitation for claiming exemption u/s 54 / 54F, booking of flat in an ongoing project is treated as “construction of property” and three years time is availed. Further, the documentation also makes it clear there is a “construction agreement” with the developer and the developer pays GST on the same treating it as “works contract”.

In the above context, I really wonder, after introduction of specific section 194M whether the person who has booked an apartment should deduct tax u/s 194M only and not 194IA

I invite views of the experts.

AI Summary

TDS applicability for apartment bookings: determine whether deduction should follow contractor rules or buyer purchase provisions under tax law. Whether TDS on a booking payment for an apartment in an ongoing project should be treated under the purchase-of-immovable-property withholding provision or under the newer withholding provision for contractual/professional payments, given that booking documentation often constitutes a construction agreement and GST is paid treating it as a works contract.