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

Confusion Arises Over Correct Tax Deduction Section for Apartment Bookings: Section 194IA or Section 194M? A participant raised a query regarding the appropriate tax deduction section for booking an apartment in an ongoing project. While buyers typically deduct 1% tax under Section 194IA, the booking is treated as 'construction of property' for tax exemption purposes under Sections 54/54F, allowing a three-year period. Documentation often includes a 'construction agreement' with the developer, who pays GST, treating it as a 'works contract.' The participant questions whether, following the introduction of Section 194M, tax should instead be deducted under this section rather than 194IA, and seeks expert opinions on this matter.