New Tax Rule Closes Loophole in Property Sales, Bolstering Tax Collection
India's real estate market just got a bit more transparent for tax authorities, but this increased scrutiny can change the dynamics of property transactions.
TaxPropertyReal EstateTdsBudget 2024Real EstateAug 02, 2024
Under the previous income tax rules, any property sold for more than ₹50 lakh required the buyer to deduct 1% as tax deducted at source (TDS). However, a clever workaround has been in play for years. To avoid the 1% TDS on property sales exceeding ₹50 lakh, buyers would structure deals to keep individual payments below this threshold.
For example, a ₹60 lakh property could be sold to a couple with each paying ₹30 lakh, or a couple could sell a property showing each received ₹30 lakh, effectively splitting the total transaction value. This scheme is about to end, as provisions of Budget 2024 will plug this loophole by considering the total sale consideration, not just individual payments.As per the new rules,
Frequently Asked Questions
What is the new tax rule for property sales?
The new tax rule considers the total sale consideration, not just individual payments, to determine the TDS liability.
Who is exempt from the 1% TDS rule?
NRIs and residents selling agricultural land are exempt from the 1% TDS rule.
What is the penalty for non-compliance with TDS payment?
Failure to pay TDS on property sales within 30 days from the end of the month in which the transaction occurred can result in a penalty of ₹200 per day until paid.
How is the 1% TDS calculated?
The 1% TDS is calculated on either the property sale value or the stamp duty value, whichever is higher.
What is the impact of the new tax rule on the real estate sector?
The move is expected to bolster tax collection and deter evasion in the real estate sector.
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