Monday, April 2, 2012

194LLA - TDS on purchase of immovable property

From 1.10.2012, if you are buying property more than Rs.50 lacs in urban areas or Rs.20 lacs in other areas be prepared to deduct income tax @ 1% and remit the same to Income tax authorities.  This is one more tax procedure proposed to be introduced to be complied by the buyer of property.

Effective 1st October, 2012 a new section is proposed to be introduced in Income Tax Act, 1961 - 194LLA under which, TDS (Tax deduction at Source) should be deducted at the rate of 1% on all payments made for transfer of property other than agricultural land if the value of the property exceed Rs.50 lacs in urban areas and Rs.20 lacs if the property is situated in any other areas.

The buyer has to produce to the registrar the tax payment challan equivalent to 1% of the transaction value to get the land registered.  This the Government claims will help rein in information on real estate transactions immediately and will help Government curb black money as the Government feels real estate is a major area which generates black money.

Question is will this new levy help achieve the Government objective of curbing black money?  The problem with India is we are extremely good in drafting laws, debating them and enacting them.  But the major point is whether we are implementing the law as it should be implemented?  The answer is a big no!!  What is the Government doing with the data it gets from banks / registrars on large value transactions?  This TDS is more of a duplication of information to the Government.  This new TDS section will unnecessarily complicate the already complex tax laws we have in our country.

"Come on India" let us move forward with tax reforms these type of tinkering legislations lead to a vicious circle leading us nowhere.  Let us not waste time discussing and implementing 194LLA, but spend that time trying to implement GST / DTA and other landmark legislations

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