The proposed 1% TDS will come into force from June this year. This proposal included in the Budget 2013, is expected to affect the sales of luxury housing units.
As proposed in the Budget 2013, those who wish to buy homes or apartments over Rs.50 lakh will have to pay an additional 1% TDS to the government. This will make the apartments costlier.
Those who have booked for flats above the price range fixed by the Budget 2013-14, it will be harder as they will have to deduct an amount as TDS from their payment to the builder. Further they will have to pay the tax and file the returns.
According to the reports of top property research firms, around 5 lakh housing units are believed to be delivered this year. As many homes as the number of people; about the same number of people have ordered for flats. All these people will be affected by the new policy.
The main idea behind the proposal was to make property dealings more transparent. It makes sure that all the property deals are recorded and registered.
The new proposal will affect both under construction and ready to move-in properties. A senior income tax official said that the tax will be reduced from the total capital appreciation. It will equally be applicable to both the ready to move in properties as well as those which are under construction.
Some tax experts have opined that the new taxation system is not clear enough to the public. It lacks clarity in many ways.
Moreover the additional 1% TDS will be levied mainly on the buyers and so there will be less demand from the buyers. It may cause the downfall of demand in the top end housing segment.
Fearing that the 1% TDS will affect the housing demand, builders have decided to meet finance minister to convey their anxiety. Builders stated that it will overburden the buyers.