Union budget 2012-13 proposes 1% tax deduction at source on any property deal other than agriculture land

In a bid to enhance tax collection and keeping track of high-value property transactions, the Union Budget for 2012-13 has proposed 1% tax deducted at source on any deal of property other than agriculture land.

The tax is mandated to be paid if the property consideration is over Rs 50 lakh in specified urban areas and Rs 20 lakh in any other area. The transaction will be registered only after the buyer provides proof of deduction and payment of TDS. The proposal will be effective from October 1, 2012.

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According to tax experts, given the wordings in budget documents, it’s applicable to resale of property and not to builders who sell their stock in trade.

“For a seller of residential property who reinvests in another apartment within two years, the capital gains would be exempted from tax. However, with the proposed TDS measure it will be a tedious process for seller as he or she will have to claim refund for this 1% in tax filing,” said Avinash Narvekar, tax partner-real estate practice at Ernst & Young.