Property sellers without permanent account number PAN face 20% tax deduction at source (TDS)

Property sellers without permanent account number PAN face 20% tax deduction at source (TDS)

Those selling immovable property without disclosing their permanent account number (PAN) are in for a tough time with the government mandating a 20% tax deduction at source (TDS) in such transactions.

The new rules that came into effect from Saturday require buyers of immovable property, other than agricultural land, to pay TDS of 1% of the deal size for transactions in excess of Rs 50 lakh.

The proposal, which was announced in the Budget, was notified recently by income tax (I-T ) department. The move is part of the government's drive to clamp down on black money in the system, with real estate transactions seen as a major source of generation of black money.

While the rules would result in a check on the "white" component of the transaction , as often sellers insist that a large part of the consideration be paid in cash to skirt the capital gains tax. In many cases, where the seller has undisclosed income, cash comes into play and the share can be as high as 50%. The deal size is also under reported to avoid stamp duty.

The I-T department is hoping that through the latest measure, at least some part of the cash economy would come under check, although it already has information of property transactions above Rs 30 lakh.


The rules notified on Friday require all buyers to deposit the 1% TDS electronically on the I-T department's website by filling a form online . Those without access to the online system can fill up the form and make the payment at an authorized bank branch. More details here

Related:

Pay more service tax on house costing over Rs 1 crore

One per cent tax deducted at source (TDS) proposed by Finance Minister on proposed on properties sold over Rs 50 lakhs after 1st June 2013

One per cent tax deducted at source (TDS) proposed by Finance Minister on proposed on properties sold over Rs 50 lakhs after 1st June 2013


Finance minister P Chidambaram has proposed to levy 1 per cent tax deducted at source, or TDS, on properties sold for over Rs 50 lakh. Anybody selling a home for Rs 50 lakh will have to pay Rs 50,000 to the government as TDS.

This will increase the price of residential properties. Shares of India's largest real estate company DLF plunged 6.25 per cent to close at Rs 259 and the benchmark index for real estate sector, BSE Realty Index, plummeted 3.93 per cent to close at 1931.

Analysts fear property transactions in national capital region, Delhi (NCR), and Mumbai may see a further fall, hitting the already struggling sales. The levy of 1 per cent TDS on property value exceeding Rs 50 lakh will curb movement of black money within the real estate sector.

To avoid TDS, property transactions may see a spurt till May 31, 2013 as the new tax law is only effective from June 1, 2013. The service tax abatement on flats with carpet area of 2,000 square feet or more, or value of Rs 1 crore or more, has been reduced to 70 per cent from 75 per cent. This means real estate developers who were paying 12.5 per cent service tax on 25 per cent of the value will now have to pay for 30 per cent of the value.

The effective service tax rate for real estate companies will increase by 62 basis points to 3.7 per cent of the property value. The real estate companies may choose to pass on this extra tax burden to customers.

Analysts say demand for super-premium properties may also get impacted after the government proposed a 10 per cent surcharge on individuals who earn yearly income of more than Rs 1 crore.

A proposal to double surcharge to 10 per cent for companies whose taxable income exceeds Rs 10 crore will hit real estate developers. The tax surcharge is seen as negative for real estate companies, the effective corporate tax rate will increase by 154 basis points to 33.99 per cent from 32.44 per cent. More details here

Budget 2013: Home loan borrowers allowed additional deduction of Rs 1 lakh

In a move that will bring cheer to many prospective home-owners, Finance Minister P Chidambaram announced incentives for home loan borrowers in his budget 2013 speech.

Chidamabram said that any person taking a first time home loan up to Rs 25 lakh during the financial year 2013-14 will be allowed an additional tax deduction of interest of up to Rs 1 lakh.

Finance Minister said that the move will help promote affordable housing and also provide employment to many in the construction sector.

Chidambaram started his speech by reiterating the resolve of his government to cut expenditure and bring the Current Account Deficit back on track. He also pointed out how India is still the third fastest growing economy amongst the bigger countries.

As the speech progressed, the FM went on to reiterate UPA's pet goal of inclusive development. he subsequently announced many schemes & allocations for SC, ST, women, differently-abled and other schemes such as Sarv Shiksha Abhiyan & provided additional allocation for the food security plan.

Presenting his eighth Union Budget, Finance Minister P Chidambaram in his budget 2013 speech gave emphasis to the need for 'inclusive growth'. The budget will focus on higher growth and financial inclusion, he said.

"Many people will be left behind if we do not pay attention to growth," he said. Chidambaram said that any growth should also be sustainable.

Chidambaram acknowledged that the room for a fiscal stimulus is constrained and that deficit levels are high. More details here 

Budget 2013: Luxury homes for the rich to become more expensive

Budget 2013: Luxury homes for the rich to become more expensive


Luxury homes for the rich would become more expensive after the finance minister today reduced the abatement on service tax availed by real estate developers for homes and flats above 2,000 sq ft or costing Rs 1 crore and above to 70% from 75% earlier.

The impact will be amplified in Mumbai for almost every buyer of under-construction apartments as the city no more offers any decent size apartment at less than Rs 1 crore, the criteria used for applying the measure.

The rate of abatement or deduction is used in calculation of service tax to be paid by the developer. Reduction in abatement will result in higher input cost that will be considered for calculation of service tax.

"Buyers in tier II and III cities will not be affected much as there are not many projects falling in category and therefore the definition of luxury housing is apt for those cities. However, for metros like Mumbai and Delhi, even the basic housing cost is Rs 1 crore and this proposal will affect almost every buyer here," said Anuj Puri, chairman, Jones Lang LaSalle India.

The total value of luxury homes, in 182 luxury residential projects offering 25,570 units across the top seven cities of NCR-Delhi, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata, launched between 2008-2012 was around $30 billion, said a recent Jones Lang LaSalle India report.

Developers also seem to be ready to pass on the impact of higher service tax onto consumers who will in turn pay more to buyer these houses.

"Reduction in the rate of abatement will make homes upward of Rs 1 core more expensive for home buyers as the tax out go will go up. But the number of people who will be affected will be few as there are not many home buyers in this segment. These higher tax out go will be passed on to the home buyers," said Venkat K Narayana, CFO of Bangalore-based real estate firm Prestige Estates Projects. More details here