Budget 2013: 1% TDS disappoints real estate industry
With release of Union Budget 2013, the Finance Minister announced the introduction of one percent Tax Deducted at Source (TDS) on immovable property transfer exceeding Rs 50 lakhs. Agricultural land is exempted from this.
This means that if a person has a property (house or plot) which is sold for more than Rs 50 lakhs then, he/she has to pay a TDS of one percent while selling it. The minister pointed out that, generally transactions of immovable properties are under-reported and undervalued. Sometimes PAN of the concerned authorities are not reported.
As per Chairman and Country Head of Jones Lang LaSalle India, the introduction of TDS is aimed for improved accountability and reporting in high-value immovable property transactions in real estate markets of Mumbai and Delhi.
Since the TDS will be charged on gross transaction (not net gains), it will highly impact (cash inflow) sellers when sales are at loss or negligible. Few investment advisors believe that this move will check speculations and decrease frequent transactions of property.
A Chennai based Chartered Accountant pointed out the proposal ambiguous. There is confusion regarding who will bear the tax and who would be responsible for deduction of tax at source. He added that it would result in many litigation. It involves many invisible costs and senior citizens would face many complications.
The real estate industry and many experts are not happy with the TDS move. Also, they think that the decision to allow additional interest deduction of Rs 1 lakh to taxpayers taking home loans for the first house up to Rs 25 lakhs in the year 2013-14 is limited. It is because it boosts only affordable housing. Earlier, the same was there for home loans up to Rs 10 lakhs.
The surcharge charges for companies earning profit beyond Rs 10 crore has been increased from 5 percent to 10 percent, which is discouraging. On the other hand, increase in excise duty on marble from 3o percent to 60 percent will also affect the cost of housing.
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