1% TDS on purchase of under construction property in resale

I have recently purchased a flat in Gurgaon for a consideration of 52 lacks (All Inclusive-Excluding Service Tax and Registration/Stamp Duty ) from a seller -in resale. This is a under construction property.
Seller has purchased this property from Builder for Rs. 48(All Inclusive-Excluding Service Tax and Registration/Stamp Duty ) lacks. Out of which 36 (All Inclusive-Excluding Service Tax and Registration/Stamp Duty ) lacks he paid to builder and Rs. 12 (All Inclusive-Excluding Service Tax and Registration/Stamp Duty )lacks were remaining.
So, I paid to seller Rs.36(All Inclusive-Excluding Service Tax and Registration/Stamp Duty ) lacks ( his payment to builder) + Rs.4(All Inclusive-Excluding Service Tax and Registration/Stamp Duty ) lacks (Premium) = Rs.40(All Inclusive-Excluding Service Tax and Registration/Stamp Duty ) lacks. Remaining Rs.12 lacks I will pay to builder in a phased manner (Construction linked plan).
As the sales consideration value is more than Rs.50 lacs I am supposed to deduct TDS on sale of property @1%. I have deducted Rs. Rs.40000 from the payment that I have given to seller keeping in mind that remaining Rs.12000 i will deduct from builder payment.
Now builder is denying that I should deduct TDS from his payment as his consideration value with the original seller is Rs. 48 lacks and below Rs. 50 lack limit. So he says that he does not fall under the clause.
My query is that as I have declared the value as Rs. 52 lacks while filling form 26QB, I am liable to deduct 1% tax ie Rs. 52000 as TDS. I have deducted Rs. 40000 so far. Now how and to whom should I deduct the remaining tax of Rs. 12000. 
Many many thanks to you in anticipation.
Looking forward for your revert
Tags: asked July 23, 2013

2 Answers

Mr. Agarwal

Your issue is probably more unique than many of the other issues surrounding this ill thought out proposal pushed through by the government.

In this particular case it is difficult to blame the builder for not agreeing to give you credit for the TDS. On the other hand your liability to deduct and pay the TDS is absolute and you will be liable to pay interest and penalty if you default on deducting and paying this TDS.

Your best bet would have been showing the full payment of Rs. 52 lakhs to the seller (after all you have paid this amount to him by way of taking over his liability to pay the builder) and deducting and paying the full 52,000 at that time. But you already seem to have filed form 26QB showing payment of Rs. 40 lakhs and deducting Rs. 40,000 from such payment (for which the seller would have given you credit - I presume) . There is a practical solution to your problem Your best bet would be to deduct Rs. 12,000/- by showing a credit in favour of the seller of the property in your books for Rs. 12 lakhs. That is assuming that the seller would be more co-operative than the builder. Afterall he will be showing sales proceeds of Rs. 52 lakhs in his books and hence he should be willing to claim credit for Rs. 52,000 instead of Rs. 40,000. Unfortunately if the seller is not co-operative than you ahve no go but to pay this Rs. 12,000 from your pocket and ask the builder to pay you back after he gets credit for it in his income tax assessment. he may or may not agree and the refund may have to wait for a couple of years at least. Unfortunately cannot see another way out for this.

Thank alot sir..As always your clarification is very clear and practical. Thanks a lot!


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