TDS - 194IA or 194M

[Ethirajan Parthasarathy]

To claim capital gain exemption under section 54 or 54F of Income Act, booking of on apartment in an “ongoing project”, it is treated as “construction” and not “purchase” of property.

The developer is also charging GST on construction value since the superstructure is not complete. Invariably the developer also enter into “Construction” agreement.

But for purpose of TDS, I have come across almost everyone is deducting tax of 1% u/s 194IA which came into force with effect from 01-06-2013.

Effective from 01-09-2019 section 194M has come into force which provides for TDS of 5% by Individual and HUF on payments to contractors if the contract value exceed 50 lakhs which is the threshold limit for section 194IA also.

In view of the above, I invite experts’ opinion on the Query whether an Individual paying amount towards apartment under construction should deduct tax at 1% or 5%.

AI Summary

Debate on TDS Rate for Under-Construction Apartments: Section 194IA at 1% vs. Section 194M at 5% A discussion on a forum revolves around the appropriate tax deduction at source (TDS) for payments towards under-construction apartments under Indian tax law. Participants debate whether TDS should be deducted at 1% under Section 194IA or 5% under Section 194M. Section 194IA applies to the transfer of immovable property, while Section 194M pertains to payments for contracts exceeding 50 lakh. The consensus leans towards using Section 194IA for such transactions, as it specifically addresses immovable property. The conversation also touches on the complexities of real estate contracts and how they might influence the applicable TDS section.