TDS on Instalments for an Under-Construction Property in Joint Names When Only One Spouse Pays
When a property is registered in joint names but only one spouse actually makes the instalment payments to the builder, the statutory responsibility to deduct TDS (where applicable) lies with the paying spouse — builders’ administrative practices asking for both PANs do not shift legal liability.
Section 1: The legal position — who is liable to deduct TDS?
Under Section 194-IA of the Income Tax Act — the provision that governs TDS on transfer of immovable property (other than agricultural land) when the consideration is ₹50 lakh or more — the buyer (person making payment) is responsible for deducting 1% TDS on the consideration paid to the seller and depositing it with the government.
When instalments are paid by only one spouse for a jointly owned under-construction property, that paying spouse is treated as the buyer for the purpose of TDS on the instalments they pay; accordingly, the TDS liability rests with the paying spouse rather than the non-paying co-owner.
TaxGuru explains this specific scenario and highlights that the statutory responsibility to deduct and deposit TDS remains with the person who makes the payment, even if the title is in joint names and the builder requests PAN details of both spouses.
Section 2: Practical implications and common builder practices
Why builders ask for both PANs
- Builders often collect PANs of all registered buyers to prepare sale agreements, ensure clean KYC, and facilitate internal accounting and reporting.
- Developers may also ask for PANs to issue receipts or to create Form 16B (TDS certificate) records; this is an administrative convenience, not necessarily a statement of legal TDS liability.
Why administrative practice is not the same as statutory liability
- Even where builders insist on including both spouses’ PAN details on bills or schedule of payments, the legal obligation to deduct TDS on each instalment follows who actually pays the instalment under Section 194-IA rules.
- If one spouse alone pays instalments, that spouse must deduct 1% TDS (when the property value or the relevant instalment obligations meet the ₹50 lakh threshold rules) and file the relevant challan and forms in their capacity as the payer.
Section 3: What taxpayers should do — steps and documentation
For the spouse who pays
- Ensure you obtain and quote your PAN correctly when making payments to the builder and while depositing TDS — the payer is the person legally required to deduct and deposit TDS under Section 194-IA.
- Deposit TDS using Form 26QB (challan-cum-statement) within the prescribed timeline after each deduction and obtain the challan acknowledgement.
- Issue or obtain Form 16B (TDS certificate) for the amount deducted in favour of the seller/co-owners so they can claim the credit while filing returns.
For the non-paying spouse (joint owner)
- Maintain clear documentation showing that payments were made by the spouse who actually paid (bank transfers, receipts, allotment letters, and builder receipts). This helps evidence the payer for tax compliance and for any future disputes about tax credits or ownership contributions.
- If the intending legal position is that ownership shares differ from contributions, keep an agreement or co-ownership breakdown to clarify capital contribution vs. legal ownership.
Section 4: Practical examples, pitfalls and recommendations
Example
If a jointly titled property has a total consideration above the ₹50 lakh threshold and the husband alone pays successive instalments to the developer, the husband is required to deduct 1% TDS on the amounts he pays and deposit it under Section 194-IA; the fact that the wife’s PAN is on the sale deed does not transfer that TDS obligation to her.
Common pitfalls to avoid
- Relying solely on the builder’s administrative entries (both PANs on receipts) as evidence that both are equally liable for TDS — statutory responsibility is determined by who pays.
- Failing to deposit TDS timely or to file Form 26QB/Form 16B — this can invite penalties and interest for non-compliance.
- Not keeping bank-level proof of actual payments — this complicates position if the tax department or co-owners question who made the payments.
Recommendations
- Document the payer for every instalment (bank statements, UTRs, builder receipts) and keep copies of Form 26QB and Form 16B.
- If spouses wish to reflect contribution proportions differently from registered ownership, execute a clear agreement documenting contribution and be ready to produce it for tax or legal scrutiny.
- When in doubt, consult a chartered accountant to ensure correct TDS deduction, timely deposit, and correct reporting to avoid penalties.
TaxGuru’s coverage of this issue makes the position clear: administrative practices by builders asking for both PANs do not alter the statutory TDS responsibility — the person who makes the payment must deduct and deposit TDS as per law.