Finance bill 2013 has proposed that 1% withholding tax will be deducted on purchase of any immovable property (except agriculture land) worth over Rs. 50 lakh. The idea behind levying this 1% TDS is to more and more property dealings coming in scenario of income tax department and nabs the black money in the real estate.
A lot of peoples have booked the flats and houses already and believe to get in 2013. This 1% deduction will be applied on any dealing after 1 June 2013. This is a big headache not only 1% TDS but it requires a lot of paperwork as well as submit the return, deposit the tax amount.
As per the TDS rule in India, the deductor must have a tax deduction account number(TAN), file the tax return and issue tax deduction certificate(Form 16A) to the deductee. This means the buyer needs to have the TAN number, have to file return and issue form 16A to the seller. Also he needs to submit the tax amount in the accounts of income tax.
There is also a complex issue. Generally the seller doesn’t entertain the taxes. So he may fix the condition to pay taxes to the buyer. This will lead to double problem with the buyer.
Around 5 lakhs homes and flats are expected to allot in the financial year 2013-14 according to property research firms.
There are some more issues in this 1% TDS on flats over 50 lakh. Finance bill 2013 doesn’t make any difference to ready property and under construction property. Also the buyer needs to deduct the TDS on the property amount and not on the balance payment. There is also not clarity in the issue of buying the property on loan or joint-name.
A large number of transactions in the property are based on EMI which may be 3-10 years and one need to pay the EMIs to the banks. That means the buyer need to cut an amount in each EMI as TDS which don’t looks practically unless this responsibility shifted towards banks.
This is still a confusion law and hoping for some clarity as well as modification in the rule which is in finance bill 2013.
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