What is the New Income Tax Rule on TDS of Sale / Purchase of Immovable Property ?

The Government of India in the Finance Bill of 2012-13 has proposed a Income Tax Collection by means of TDS of 1% to Nail Down Citizens who have been evading Income Tax despite making a moolah in Land Deals. What does the Bill say ?

Excerpts of the Proposed Income Tax TDS on Immovable Property is as follows
1. Definition of Immovable Property according to the Bill,

immovable property” means any land (other than agricultural land) or any building or part of a building

2. The Bill classifies certain areas as Specified Areas as follows,

i) Greater Mumbai urban agglomeration;
(ii) Delhi urban agglomeration;
(iii) Kolkata urban agglomeration;
(iv) Chennai urban agglomeration
(v) Hyderabad urban agglomeration;
(vi) Bangaluru urban agglomeration;
(vii) Ahmedabad urban agglomeration;
(viii) District of Faridabad;
(ix) District of Gurgaon;
(x) District of Gautam Budh Nagar;
(xi) District of Ghaziabad;
(xii) District of Gandhinagar; and
(xiii) City of Secunderabad;

3. In the above Specified Areas, if the Value of the Transaction is Greater than or Equal to Rs 50Lakh / Rs 5 Million, then the BUYER has to first do a TDS of 1% of the value of the property and deposit the same to the Central Govt, Dept of Income Tax. Only upon furnishing the Proof of TDS Deposit, the transaction can complete.

4. For Rest of India i.e Any Place Other than Specified Areas if the amount of Transaction is Rs 20 Lakh / Rs 2 Million or more, then the BUYER has to do a TDS of 1% of the Value of the property and deposit the same with Dept. of Income Tax and only then he will be allowed to complete the transaction.

1% of Declared Value is Peanuts, Why is this such a Big issue ?

  • To do TDS, you will require a PAN Card, thus the Government will get to know who the Buyer and Seller.
  • Once PAN of Buyer and Seller are with the IT Dept, they will see analyze your Financial Profile, IT Payment Pattern and whether your profile matches the Value of the property or not, etc
  • IT Dept will also get to see if the said property is in the books of accounts of the Seller, if not, then it becomes benami property and if yes, then where is the source of income to purchase the same ?
  • The Government of India with its better IT Infrastructure already has information on over 600,000 Property Deals which are under its scanner. Due to crunch of staff, they haven’t been able to make a bold move, but with 1% TDS amount they are going to use it to staff the Department and who will crackdown on Tax Evaders aggressively.

A Reason to be Happy ?

  1. Investment in Equities over Rs 2 Lakh in a Year is informed to the Dept of IT, but in Land dealings it was totally disconnected. Now they have began somewhere and it will take shape soon 🙂
  2. The Government has a genuine interest to curb Black Money in Property / Real Estate and has acted on the same
  3. This will definitely curb the speculative interest in Indian Real Estate and remind speculators not to dodge the Government
  4. The Government for the first time has encouraged to Set Off Capital Gains from sale of Residential Property if invested in SME Plant and Machinery. Greatest Move in our Opinion to encourage SMEs.

Both of the above are in Line with the Greatest Outlook an Emerging Economy like ours got to have – Industrialization. We have already said “Industrialists make Big Money and Investors, Second Best”.

To conclude, if not today, but tomorrow, the Government is going to collect its share of tax on all Property Deals where it was evaded. So Invest in Indian Companies / Industries or still better be an industrialist yourself and Grow with the Economy.

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