Tightening screws on black money in the realty market, the government has proposed 1% TDS (tax deduction at source) on transfer of immovable property if the sale value exceeds Rs 50 lakh in urban centres and Rs 20 lakh in other areas.
The measure is proposed in the Budget and is being taken to "deter the generation and use of unaccounted money", Finance Minister Pranab Mukherjee said in his Budget speech. Immovable properties, other than agricultural land would be covered under the new provision.
The application of TDS would be effective from October 1 this year. It has been provided that transfer of property would not be registered unless the buyer furnishes proof of deduction and payment of TDS.
At present, tax is required to be deducted at source by the transferee on transfer of immovable property by a non- resident. But, there is no such requirement on transfer of such property by a resident except in few case, it added.
The new proposal intends to collect tax at the earliest point of time and have a reporting mechanism of transactions in the realty sector.
The provision would apply if the consideration exceeds Rs 50 lakh if property is situated in "specified urban agglomeration" and Rs 20 lakh if property is situated in any other area.
Reacting to the proposal, the apex realty body CREDAI said that this would lead to increase in property prices.
"It looks like that the proposal of TDS would apply on transactions in the secondary market and not on sale of builder's flat," Confederation of Real Estate Developers' Association of India (CREDAI) Chairman Pradeep Jain said.