Once bitten, twice shy. If this saying were to be followed literally, the finance minister wouldn’t have restored the levy of deduction of tax at source (TDS) on immovable property transactions. The introduction of a similar proposal was proposed last year in Budget 2012, but did not see the light of the day. It was ultimately withdrawn due to the number of representations pointing out the compliance burden. Surprisingly, a microscopic reading of the new proposal makes us believe that the compliance burden has in fact substantially increased in the current proposal.
It was quite apparent that the finance minister was wearing the hat of a revenue collector when presenting this year’s Budget proposals considering that he is faced with a huge fiscal deficit problem. And the most obvious sector to be pushed to the fence was the real estate sector which is generally perceived to be not so “real”.
The finance minister was vocal enough in putting it on record that transactions in immovable property are generally undervalued and under-reported (few would be able to articulate anything against this).
In addition, half of all property transactions are not supported with the PAN of the parties involved. With a view to improve reporting mechanism of such transactions and to collect revenue at the earliest point of time, the finance minister has proposed the introduction of a levy of TDS on immovable property transactions (other than agricultural land transactions). This enables a buyer will be liable to deduct taxes at 1 per cent of consideration from a resident seller where the property value is in excess of Rs 50 lakh.
Introduction of the TDS provisions may have manifold repercussions, especially by increasing the compliance burden for buyers. Based on the current reading of the law proposed, the buyer will have to obtain Tax Deduction Account Number (TAN’), file TDS return and issue TDS certificate.
The provision introduced last year had a specific exemption from obtaining a TAN and filing a TDS return, on which the current proposals are silent. A salaried individual is likely to buy his dream home, only once in his life on