The government proposal to deduct tax at source for property transactions has raised concerns for potential property buyers and sellers alike, and surprised many.
It was only last year, a similar measure was proposed and withdrawn following complaints regarding implementation difficulties. This year again, with no change in remittance infrastructure or attendant problems, the government has introduced TDS (tax deduction at source) of one per cent on the transaction of all immovable properties except agricultural land, which exceeds Rs.50 lakh in value.
K. Suryakanth Shenoy, a chartered accountant based in Chennai, finds this proposal riddled with problems. He said that “it is not clear who will bear the tax and who would be responsible for deduction of tax at source. If the seller is liable for deduction, the buyer will have to be at the mercy of seller for the TDS certificate. In this case, any delay would mean additional burden of tax, late filing of return or requirement to pay and seek refund. This could also lead to a plethora of litigations. The proposal though looks akin to filing of a simple challan at the time of registration, in reality, it would be more complicated and involve further invisible costs.” The senior citizens, in particular, would face these complications more. Hazels of tax and online remittance could be daunting. Mr. Shenoy further added that “though the move to deduct TDS may be laudable, it saddles the IT department with further returns for scrutiny, additional assessments, claims, demands and refunds and may be more litigations.”
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C. Sridhar Varadaraj, Vice-President, Hanu Reddy Realty, said that “this unexpected proposal may curb speculation in high-value real estate markets such as Mumbai and Delhi and lead to more transparency in transactions. It would fill the coffers of the government in the short-term, but would affect the real estate sector on the long term. Compliance issues would make it difficult for every one involved.”