Tax to be deducted at source when an immovable property is transferred

With the economy not showing up any sign of recovery, scams, polls around the corner, the Finance Minister decided to mop up the tax collection by introducing a Tax Deduction at Source (TDS) from transfer of immovable property.

Why this measure? In our country, the real estate business lacks transparency and most of the deals are done through cash. Thus lot of black money being created in the process.

What this new measure says?

• This takes effect from 1-Jun-2013.
• In a transaction of immovable property transfer valuing Rs.50 Lakhs (Rs.5 million) or more, the buyer has to withhold (deduct) 1% of the value and remit to the tax department.
• The transfer of agricultural lands is exempted from the above
• The rate of deduction can go to 20% if the PAN is not provided by the seller. If PAN is provided, the deduction will be at 1%.
• When to deduct?
• at the time of making any payment or crediting of any sum as consideration for transfer of immovable property.
• What are the compliance?
• One single page simple challan for the payment containing details (mainly PAN) of the transferee and transferor and the some details about the property.
• The transferee need to required to obtain any Tax Deduction and Collection no. (TAN).
• The transferor can get credit of the amount deducted based on the TDS Challan provided by the transferee.
• What are the contents of the one page challan?
• Permanent Account No. (PAN) of Transferor (Payee/Seller)
• Category of PAN of Transferee
• Category of PAN of Transferor
• Full Name of the Transferee
• Full Name of the Transferor
• Complete Address of the Transferee
• Complete Address of the Transferor
• Complete Address of the Property Transferred
• Details of amount paid/Credited
• Tax Deposit Details

With real estate companies are lobbying to roll back this provision, this will also increase the compliance and claiming of the amount so deducted. Let us wait and see.

Cheers

Gopal