Amendments in Finance Bill 2013: Probable impacts on real estate
Some of the new amendments made in the Finance Bill, 2013 to the Income-tax Law is expected to have a deep impact on real estate sector in the 2013-14 fiscal.
The amendments relate to taxing the notional income in the real estate transactions as against the real income of the real estate developers as well as the real estate investors.
Many developers and investors are likely to get into risk and end up paying high taxes because of these amendments. The provision relating to Tax Deduction at Source (TDS) on real estate transactions is also going to pause compliance related formalities to every real estate deal higher than a particular price tag.
The extension of the withholding tax for properties over Rs 50 lakh is the important change among all other amendments. The burden is on the buyers to deduct 1 percent tax from the payment being made though there are some points which need to be clarified yet.
Another point to be thought about is that whether the provision is also applicable for transactions related to under construction properties too or not, said an expert. The major problem for the buyers associated with this system is to register themselves with the tax department and obtain a tax deduction account number or a TAN number. Many experts observed that it is very annoying for property buyers to get a TAN number and would be hesitating to register with the I-T department voluntarily. However, to improve compliance, the Finance Bill has done away with the requirement of property buyers needing a TAN number.
In case, the provision is not complied to, it would even lead to penal provisions and prosecution, for which people should be careful.
Another amendment says that a little more deduction shall be granted towards interest on all purchases of new housing units bought after 1st April 2013.
In order to correct cash flows, developers (mainly smaller ones) often sell their stock below circle rates pertaining to any area and this has become a matter of difficulty with the new Finance Bill. Property deals should be made at least not less than the prevailing circle rates, announced the finance minister.
All properties bought by individuals and Hindu United Families below circle rates have to be brought under the tax net, as per the amendment made to Section 56 of the Income Tax Act.
Any transaction without adequate consideration will not be considered under the income tax provision. The difference of the consideration and vis-à-vis the circle rate will be included under the buyer’s income as income from various sources.
It is very important for homebuyers to possess enough knowledge of all these recent amendments so that they can be careful in understanding tax implications without any risk in their future transactions. The amendments are likely to have far reaching consequences on various bodies related to real estate transactions like buyers, investors and developers. Putting an end to the TAN number system may even affect the tax revenue of the government earned from real estate sector.
Related Legal Articles:
BMC new property tax bill challenged
Residents’ pleas heard by High Court
HC amends property ownership rights of Hindu widows
amendments in finance bill, Circle rates, Finance Bill 2013 amendments, I-T department, Impact of Finance Bill, impact on real estate, income tax provision, Indian real estate, new Finance Bill, new housing units, notional income, Property Buyers, Real Estate Developers, Real Estate Sector, Real estate transactions, TAN number system, Tax Deduction Account Number, tax deduction at source, tax for properties, tax revenue of the government, TDS, TDS on real estate transactions, under-construction properties
