TDS on transfer of property when gifted if value is more than Rs. 50 Lacs

TDS on gifted property

Finance Act 2013 has inserted a new section 194-IA. Payment on transfer of certain immovable property other than agricultural land.—
(1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent. of such sum as income-tax thereon.
(2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees.

Explanation.—For the purposes of this section,—
(a) "agricultural land" means agricultural land in India, not being a land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2 ;
(b) "immovable property" means any land (other than agricultural land) or any building or part of a building.’.
This amendment is effective from 1st June, 2013.

After going through the various provisions of section 194-IA the issue arises: 

*Whether the provisions of this section are applicable in case of transfer of immovable property(other than agricultural land) as gift? or

*Whether TDS is to be deducted or not in such a case?

 No doubt the transferor in this casmare is a resident and the property in question is an immovable property(other than agricultural land) having market/collectrate value more than Rs. 50 lacks, as no monetary consideration is involved in the transfer of property when gifted, question of paying any amount by the transferee to the transferor does not arise. Only for stamp duty purpose the value of the property (which is more than Rs. 50 lacs in this case) as per collectrate value has to be considered at the time of transfer. No credit to the account of the transferor takes place at any moment in case of gifted property. So in our opinion no TDS needs to be deducted in case of gifted property as the basic ingredients of charging section 194IA(1) is missing for making the person liable to deduct TDS  i.e. as there is no payor or payee and no sum is paid or credited in the account of transferor.

Furthermore in case of Gifted property where collectrate value is more than Rs. 50 lacs, particularly from the relatives from whom gift is permissible without consideration, no TDS should be deducted as no liability of tax at any stage arises.

Note: In case some one has different firm opinion on the above subject please comment!

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