Real estate transaction including the purchase and selling of all types of lands barring one, gets costlier; TDS now deductible for transactions exceeding INR 50 Lac. The Central Board of Direct Taxes just made the already complex real estate transactions a lot more complicated, by implementing TDS on the selling of an immovable property valued at over INR 50 Lac.
The revamping of the Income tax department and the government’s newly found resolve to recover its losses by increasing the efficiency of its tax collection procedure seems to be having an effect on all entities relating to the department. The Central Board of Direct Taxes has in an important announcement made it mandatory for the seller to pay tax which is deductible at source, in transactions involving land (with the exception of agricultural segment) that is valued at over INR 50 Lac.
The move carries great significance for the urban areas in metropolitan cities such as Bangalore, which has been witnessing a tremendous boost in the real estate prices. The direct income for the I-T department is expected to be fantastic and would significantly boosts revenues. The rate at which the tax would be deducted has been set at 1 per cent of the total valuation, and would be levied under all modes of payment. The rule is applicable on transactions involving payment routed through bank loans as well, which is a major clause, primarily responsible for its effectiveness. The move has been well received by the finance pundits, but has been termed as a delayed response to the large scale tax evasion prevalent in the country.
It has been stated that it would be the buyer’s responsibility to deposit the tax with the department in electronic form, before making the payment through any mode. There is another rider though, which takes the cost of the land to just another level. If the seller does not disclose his PAN card or doesn’t possess one, the rate at which the tax would be calculated would reach a whopping 20 per cent. The scheme exempts agricultural lands, but includes all other forms of immovable properties, including buildings or part of buildings. This would carry serious implications for the Indian middle class as well, since a regular house in an urban setting fits the bracket easily, and this would mean that he would have to deliver a percentage of his hard earned money. The provision is applicable to those properties which are bought under construction, and the payment for which has to or was to be made after Jun 1.
The provision though is expected to work, because of the direct benefit that it’ll provide on the transparency front, which has always been a dodgy aspect of the real estate industry. Filing for tax returns would render the deal completely legal and transparent, which would help a lot of people. TDS on immovable properties has been the bone of contention for a long time, but it is only now that one can expect the benefits along with the riders to arrive.