Delhi ITAT Clarifies TDS Threshold for Joint Property Purchases Below ₹50 Lakh

Context: What is Section 194-IA, and Why Does it Matter in Joint Purchases?

Section 194-IA of the Income Tax Act, 1961 requires buyers of immovable property (other than agricultural land) to deduct TDS at 1% of the consideration if the property’s sale value exceeds ₹50 lakh. This provision is designed to curb the circulation of unaccounted money in real estate transactions. Traditionally, buyers must deduct and deposit this TDS with the government, and the seller gets credit for the deducted amount.

The question arises when a property is bought jointly by multiple buyers and the total property value crosses ₹50 lakh, but each person’s share is below the threshold. Tax authorities have argued that TDS must still be deducted, causing confusion and often leading to penalties and litigation.

The ITAT Ruling: Per Person Threshold, Not Per Property

In the case of Harvindra Singh Vs ACIT before the Delhi ITAT, the assessee, along with two others, purchased property valued at ₹55 lakh. Harvindra Singh’s individual share was ₹18,13,333. Tax authorities (CPC-TDS) claimed TDS should have been deducted on the whole transaction since the total exceeded ₹50 lakh, raising a demand of ₹3,48,333 plus interest.

The Tribunal, relying on its earlier decision in Vinod Soni Vs. ITO, clarified that:

• The ₹50 lakh threshold for TDS applies to each transferee’s (buyer’s) share, not the aggregate property value.
• If an individual’s share in a jointly purchased property is below ₹50 lakh, TDS under Section 194-IA is not required from that individual.
• This applies whether there is a single sale deed for all buyers jointly, or separate deeds.

This interpretation harmonizes tax law with the practical reality that joint buyers may not individually cross the ₹50 lakh threshold, despite the property value exceeding it.

Implications for Taxpayers and Professionals

• Joint buyers: Individuals purchasing property jointly whose share is below ₹50 lakh are not required to deduct or pay TDS under Section 194-IA, regardless of the property’s total value.
• Professional advice: Tax consultants should closely examine the buyer’s individual share, not merely the aggregate property value, when advising on TDS requirements.
• Penalty relief: This ruling provides precedential support for quashing demands and penalties in similar circumstances.

What the ITAT Set Aside

The ITAT set aside:

• The TDS demand notice under Section 200A for non-deduction of TDS (₹3,48,333 plus interest)
• Previous orders passed by the CIT(A)/NFAC that upheld the demand

Reference to Previous Precedent

The Tribunal relied on its own 2018 decision (Vinod Soni Vs. ITO), which established that for the purposes of Section 194-IA, it’s the consideration per transferee, not the total transaction, that governs.

Practical Takeaways

• When multiple buyers are involved in property purchase, each should check whether their own share meets or exceeds ₹50 lakh.
• Documenting the share in the sale deed or agreement increases clarity for all parties and in tax proceedings.
• If the share is below ₹50 lakh, buyers can defend non-deduction if challenged by authorities, referencing this and the Vinod Soni decision.

Worked Example

A property is sold for ₹55 lakh to three buyers. Each buyer pays ₹18.33 lakh. The sale deed records their respective shares. No buyer is required to deduct TDS under Section 194-IA, even though the property value is over ₹50 lakh. If TDS is demanded, buyers can cite this ITAT decision in appeal.

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Key Dates

• CIT(A)/NFAC order: 26 May 2025
• ITAT order: 29 April 2026

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Key Points

• Delhi ITAT held TDS under Section 194-IA applies per transferee's share, not on total sale value.
• No TDS required if an individual's share in joint property purchase is below ₹50 lakh.
• The ruling sets aside penalty and TDS demand for non-deduction in such cases.
• The law applies identically whether buyers purchase jointly or individually.
• The ITAT relied on its own precedent in Vinod Soni Vs ITO.
• Practical relief for taxpayers buying property jointly below ₹50 lakh share.