Unsold inventory of the realtors to be taxed: IT department’s proposal
It is speculated that the revenue department will ask the builders to pay taxes on their unsold stock of ready houses as per a proposal that is under consideration. If that happens then the housing prices are expected to fall as the developers will try to sell off their properties and reduce their inventories.
The income tax department last week suggested the finance ministry that this can be one of the ways to earn some more taxes. A court order stated that the ready unsold flats held by the builders as stock in-trade are liable to be taxed as “income from house property” even if they are not rented out.
If the government clears the proposal, it will affect developers holding about 100,000 ready or close to be completed unsold properties in top eight cities across the country. According to a data from the property research firm Liases Foras these properties will attract tax computed on the basis of notional annual letting value.
The builders are upset as they will have to either sell these properties soon, perhaps by offering discounts, or get into expensive litigations. The builders are opposing to this proposal as many of them are forced to hold stock simply because they are unable to sell in a sluggish market.
Getamber Anand, managing director of ATS Infrastructure mentioned that already the builders are under a lot of pressure as the sales are sluggish and if they have to pay tax for the unsold properties, then it might lead them into huge losses. Anand also mentioned that it is not out of choice, and even reducing price cannot guarantee sales.
JC Sharma the managing director of Bangalore-based Sobha Developers stated that the real estate developers are in the business of constructing and selling homes and in the process if some of them remain unsold, it is to be considered stock-in-trade and should not be taxed.
The builders are also upset as there is no consistency among the different circles of the income tax department, under which various developers fall, and this also creates a lot of confusion.
Source- The Economic Times
Arun Jaitley, Income Tax, income tax department, J Sagar Associates, Maadhav Poddar, Tax department
