Buying a property worth more than Rs 50 lakh usually comes with a tax obligation — the buyer must deduct 1% TDS under Section 194-IA of the Income Tax Act. However, a recent ruling by the Income Tax Appellate Tribunal (ITAT) Ahmedabad shows that this rule is not always so straightforward.
In a significant relief for homebuyers, the tribunal has held that no TDS is required even if the total property value exceeds Rs 50 lakh — provided the payment made to each seller is below Rs 50 lakh.
What was the case about?
The case involved Hasmukhbhai Jayantibhai Patel vs ITO (ITAT Ahmedabad, March 27, 2026). The taxpayer had purchased a property jointly owned by multiple sellers and the total property value exceeded Rs 50 lakh. However, the share of each co-owner (seller) was below Rs 50 lakh. The buyer did not deduct TDS.
The tax department disagreed and held that since the total value crossed Rs 50 lakh, TDS should have been deducted.
What did the tax department do?
The Assessing Officer (AO) treated the buyer as an “assessee in default”, raised a tax demand of about Rs 13.5 lakh and also levied interest for non-deduction of TDS.
The first appellate authority, CIT(A), also supported this view. It said that the Rs 50 lakh threshold should be seen for the entire property value, not individual shares.
What did ITAT say?
The ITAT Ahmedabad overturned this decision and ruled in favour of the taxpayer.
The tribunal clearly stated that for the relevant year (AY 2015-16), the Rs 50 lakh threshold must be checked per seller, not on total property value. Since each seller received less than Rs 50 lakh and the buyer was not required to deduct TDS.
Why did ITAT give this ruling?
The tribunal gave a simple but important reasoning:
1. Law at that time did not allow aggregation
At the time of the transaction, the law did not say that payments to multiple sellers should be combined. So, each seller’s share had to be considered separately.
2. Amendment came later (Finance Act 2024)
The rule was changed later: From April 1, 2024, law now requires aggregation of total property value. But ITAT clarified that this amendment is prospective, not applicable to older transactions.
3. Past rulings supported the taxpayer
The tribunal also relied on earlier similar decisions where it was held that if payment to each seller is below Rs 50 lakh then no TDS obligation arises.
What happened to the tax demand?
Since ITAT ruled that TDS was not required the Rs 13.5 lakh demand was deleted and interest charged was also cancelled.
What this means for homebuyers
This ruling is especially important for people who bought property before April 1, 2024; purchased from multiple co-owners; and paid less than Rs 50 lakh to each seller individually. In such cases, even if the total property value exceeded Rs 50 lakh, TDS may not be required
Important: Rule has changed now
Buyers should be careful going forward.
Before April 1, 2024, Rs 50 lakh limit applied per seller; but after April 1, 2024, Rs 50 lakh limit applies on total property value (aggregate basis). TDS will likely be applicable even if individual shares are below Rs 50 lakh.
Simple example to understand
Old rule (before 2024):
Property value: Rs 80 lakh
4 sellers → each gets Rs 20 lakh
No TDS required
New rule (after 2024):
Same case
TDS will apply because total value exceeds Rs 50 lakh
Summing up…
The ITAT Ahmedabad ruling makes one thing clear:
For older property deals, buyers cannot be forced to deduct TDS just because the total property value exceeds Rs 50 lakh, if individual payments to sellers are below the threshold.
At the same time, buyers must stay updated with the latest rules, as the law has now changed and compliance requirements have become stricter.
Disclaimer:
This article is based on a recent ITAT ruling and explains the interpretation of Section 194-IA of the Income Tax Act, 1961 in the context of that specific case. The decision relates to Assessment Year 2015-16 and is based on the legal provisions applicable during that period.
It is important to note that the law governing TDS on property transactions has since been amended by the Finance Act, 2024, with effect from April 1, 2024. Under the amended provisions, the Rs 50 lakh threshold is required to be considered on an aggregate basis for the entire property, and not per individual seller. Therefore, the outcome of this ruling may not apply to transactions executed on or after this date.
Readers should also note that judicial decisions are based on specific facts and circumstances of each case. While this ruling may offer guidance, it does not automatically apply to all similar situations. Tax positions can vary depending on the structure of the transaction, ownership pattern, and interpretation by tax authorities.
This article is intended for informational purposes only and should not be construed as legal or tax advice. Readers are advised to consult a qualified tax professional or legal advisor before taking any action based on the information provided.
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