Implementation of 1% TDS on Luxury Homes from June
The proposed 1% Tax Deducted at Source (TDS), initially outlined in the Budget 2013, is slated to come into effect from June of this year. The implementation of this proposal is anticipated to have an impact on the sales of luxury housing units within the real estate market.
As per the stipulations of Budget 2013, individuals intending to purchase homes or apartments priced above Rs. 50 lakh will be subject to an additional 1% TDS payable to the government. This levy is expected to augment the overall cost of these apartments for prospective buyers.
For those who have already booked apartments falling within the price range established by Budget 2013-14, compliance will entail deducting the TDS amount from payments made to the builder. Furthermore, these individuals will be responsible for remitting the tax and fulfilling the requisite filing obligations.
According to reports from prominent property research firms, an estimated 5 lakh housing units are scheduled for delivery this year. With a demand roughly equivalent to the number of units available, a substantial segment of the population will be affected by the implementation of this new policy.
The primary objective of this proposal is to enhance transparency in property dealings by ensuring that all transactions are duly recorded and registered.
Impact on Property Transactions
The new proposal will extend its reach to both properties that are under construction and ready to move-in properties. According to a senior income tax official, the tax will be deducted from the total capital appreciation. The regulation will apply uniformly to properties ready for immediate occupancy and those still undergoing construction phases.
Some tax experts have voiced opinions suggesting that the new taxation system lacks adequate clarity for the general public. Critics argue that ambiguities persist in various aspects of this regulatory framework.
Moreover, the imposition of an additional 1% TDS primarily targeting buyers is expected to dampen demand in the market. This may lead to a decline in demand within the top-end housing segment, impacting sales and market dynamics.
Concerned about the potential adverse effects of the 1% TDS on housing demand, builders have expressed intentions to engage with the finance minister to convey their concerns. They assert that this measure will place an excessive burden on prospective homebuyers.