Finance minister Pranab Mukherjee’s move to withdraw one per cent tax deducted at source (TDS) on transfer of immovable property has brought relief to the real estate industry. The industry said the move would be helpful, as TDS on property transactions would have discouraged buyers due to price escalation.
"It is an excellent move, as TDS was totally unnecessary," said R R Singh, director-general, National Real Estate Development Council. “Property buyers would benefit from the withdrawal. This would have been an additional burden on taxation," he said.
Earlier, the Finance Bill proposed TDS on the transfer of immovable property (other than agricultural land) at one per cent of the transaction value. The threshold was Rs 50 lakh in case of properties in a specified urban conglomerate, or Rs 20 lakh in case the property was in any other area.
On Monday, the finance minister withdrew the tax, saying, "I have received a number of representations pointing out the additional compliance burden this measure would impose. I, therefore, propose to withdraw this provision for the levy of TDS on transfer of immovable property."
Lalit Jain, chairman, Confederation of Real Estate Developers Association of India, said it was a sensible move, as TDS would have created additional administrative costs for the government, without much gain. Moreover, it would have been a burden on consumers. When asked if one per cent was too big a burden, Jain said though in financial terms, one per cent TDS was meagre, it would have led to administrative havoc, owing to the paperwork and other formalities related to it.
"TDS would have generated revenues for the central government, when real estate and land is actually a state subject," said Sunil Dahiya, managing director, Vigneshwara Developers.
About 80 per cent of townships or group housing is carried out by state governments, while just 10-20 per cent is accounted for by private developers. Neither land, nor customers were provided by the Centre. So, why would TDS revenue go to the Centre, he argued. The TDS would only have escalated property prices and ultimately discouraged buyers, he said.