The Finance Minister
Mr. Pranab Mukherjee’s have proposed
an amendment to the Income Tax Laws thereby requiring home buyers to deduct 1% on the Sale Consideration or the value adopted
by the Govt.
for levy of Stamp
Duty whichever is higher
as Tax Deducted at Source (TDS). Adv. R.
P. Rathod. states if this proposal is enacted it would be yet another
hard blow on the already
suffering Real
Estate Sector.
Adv. R. P. Rathod.
further explains
that the criteria of applicability of TDS
on immovable property (other than farm land) which becomes operational
from October
1, 2012, is proposed
at Rs. 50 Lakhs in Urban
areas and Rs. 20 Lakhs in
other areas. Further it has been mentioned in the proposal that the Sub-Registrar
of assurance shall
not register the said
transaction unless
and until the purchaser
attaches proof of payment of TDS
along with the respective agreement.
He says
that the said provision
could encourage black
money component in real
estate. Further it will also
dampen the real estate sales figures
in an already sluggish
market.
According to Adv. R.
P. Rathod. as per the existing
laws a transaction of immovable
property the value of which is above 30 lakhs is already being reported
in the AIR
along with the Pan details so the government
can easily find out details of any deal from the Stamp duty and Registration data, which is available every month. So why this unnecessary harassment
of levying TDS and then forcing the assessee to file returns and claim refund
which involves a time lapse of more than a year.
Adv. R. P. Rathod. further states that in absence of clarification it is interpreted
that the same shall
apply both in case
of a resale property as well as property
booked or purchased
from the Builders
as well. Some of the
small time developers
to avoid from being
reported and subjecting to the TDS would resort
to either drawing
up two
agreements or reducing the agreement value with a majority being
taken in cash. While the big builders and developers who are already suffering
from the tightening of interest rates from the financing institutions would rather
give a go ahead on increasing the property prices further, as substantial
amount of their money would be unnecessarily be blocked for more than a year.
Further
he states that
a many of the property
transactions involve sellers
who are either upgrading
or relocating their house. Since
the sale proceeds
are reinvested in new property, there
is no tax implication as per Income Tax laws and even
the seller who is out of the tax net would have to go through the unnecessary hassle of filing
the returns and awaiting
for more than one year for his refund.
Adv. R. P. Rathod. adds that this amendment to the Income Tax laws can further give rise to the already peaked property prices. As 1% of the ready reckoner rates or agreement value is a very large amount. In case of property valued @ 50 Lakhs the TDS
amount would be 50,000/-, as majority of the sellers reinvest in the property market so they would try to recover
this short
fall by further increasing the property
prices not only this
but the new proposal
would make
the home purchase a complete tedious
process and will confuse
a salaried individual
as to the numerous
taxes he has to shell
out.
He says that if you buy an under-construction
flat, one has to pay Service tax, VAT, Registration fees and Stamp duty and now TDS.
For a buyer who is not aware of the law, it will become very difficult for him
to purchase a flat. Though this amendment does not introduce any fresh tax liability and is aimed on creating a reporting tool for property transactions. It would
add-up to administrative hassle & unnecessary
harassment of genuine buyers
and sellers, which is unwanted
especially when the AIR system is in place.
Further
this would lead to complex situation and innumerous questions from the buyers like Is TDS to be charged also
on the VAT, Service Tax, should we include Stamp duty also, will TDS apply on
development charges, club house charges, etc charges paid to builders which the
Finance Minister should have reasonably thought before proposing the said amendment,
but what can we do when Mr. Pranab Mukherjee’s eyes are all set on collection of taxes Concludes Adv. R.
P. Rathod.
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