I purchased a residential site through a sale deed for ₹35 lakh: registered by the developer (a private limited company) holding general power of attorney from the owner of the site(SL:1). I also entered into a construction agreement (SL:2) with the developer for the construction of a villa at the site for a cost of ₹147 lakh (inclusive of VAT, service tax of ₹12 lakh).
I understand that any one buying real estate worth more than ₹50 lakh has to deduct TDS @ 1% of the sale price of the property before paying the seller and deposit the TDS with the tax department. I am of the opinion that, TDS is not applicable for the above two transaction, since for SL:1, the transaction value is less than ₹50 lakh, and in SL:2, it is not a purchase of property, it is a contract for construction, and VAT and service tax is paid by the developer to the Government.
Is this accurate?
Harish PA
Chennai
Your understanding in so far as the sale of undivided share of land is correct.
Tax should be deducted at source for sale of property having a value of ₹50 lakh and above. Any payment made pursuant to a contract will attract TDS at 2%. Please consult your chartered accountant for a comprehensive opinion on this.