* There is
no clarity even in instances where the purchase is made from borrowed funds..!
* The buyer
would be responsible for the deduction of TDS..!
Lakhs of people who
have booked under-construction apartments and home costing over Rs. 50 lakh
have a big tax headache coming up their way. While making payments to builders/
promoters, they will have to deduct 1 per cent
of the deal value as tax after June 1, 2013 and also go through the
onerous task of depositing tax and filing returns.
As many as about 4.5
to 5 lakh houses are expected to be delivered in 2013, according to Property
research firms Liases Foras & PropEquity as well as property consultancy CB
Richard Ellis.
The Union Budget 2013 has proposed that purchaser of an
immovable property (other than agricultural land) worth more than over Rs. 50
lakh is required to pay withholding tax at the rate of 1 per cent from the
consideration payable to a resident transferor.
The guiding
philosophy of this idea was to ensure property deals are reported, & it was
believed that the rule will apply to ready property acquired.
But officials say the
finance bill does not make a distinction between under construction & ready
property.
According to an
income tax department official, "Tax will have to be cut from the total
consideration & not balance payment made after the enforcement of the
finance act"
According to rules in
respect of tax deducted at source, buyers would have to obtain a tax deduction
and account number, or / TAN, file a return with the tax authorities and also
issue a TDS certificate to the seller.
Once the tax is
deducted, the builder would be able to claim credit for such TDS against its
tax liability but the burden of this tax could fall on buyers if cash-starved
builders refuse to take the liability on themselves.
Tax experts said the
onerous requirements should be diluted in the case of such buyers and the
proposal needs to be clarified.
Mr.Sunil Jain,
Partner, J Sagar Associates said, "An individual buyer will be obligated to
comply with the withholding tax registration or
/ TAN, tax payment, e - TDS returns, issue of TDS certificate to seller
for claiming tax credit unless a simplified mechanism is provided in this
direction"
There is no clarity
even in instances where the purchase is made from borrowed funds and where the property is in joint ownership.
Mr. Rahul Garg,
Leader, Direct tax, PwC India said, "It looks at the provision of
property of Rs. 50 lakh or / more,
assuming it is a transaction that happens at one go. A large number of
transactions are installmentbased and extend over 3 to 5 years where
installments are disbursed directly by banks"
The provision would
mean that the buyer would be responsible for the deduction of TDS each time an
installment is disbursed by the bank unless the responsibility is shifted to
the bank.
Builders see the new
TDS as a burden on buyers and have taken up the issue with the finance
minister.
Src: ET
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