First TDS then Registration, Bangalore Properties

Buying property worth over Rs 50 lakh? Then pay TDS before registering it, or income tax sleuths will come knocking on your door.

The TDS (Tax Deducted at Source) kicks in from June 1 with the implementation of Section 194-IA, announced in the finance budget of 2013-14. As per this section, the buyer should provide TDS documents on transfer or sale of immovable property (mainly land or house) other than agricultural land, before registering the property. The sub-registrars act as check-posts, if such transactions take place and TDS documents are not provided. This is applicable only if the transaction is Rs 50 lakh or above.

This was made clear at a workshop organized by the IT department and the stamps and registration department, to educate sub-registrars on TDS provision on the sale of immovable property, on 11th June.

Of the total transaction, 1% is TDS and 1% is levied as stamp duty, but in case the seller doesn’t provide PAN documents or gives an invalid PAN, the buyer should deduct 20% tax instead of 1%.

S Ravi, director-general of income tax (investment), said: “Sub-registrars ensure that PAN numbers and the permanent address of the seller should be available because many a time, in case of tax evasion and property sale, the original land owner is untraceable by the department. This should be done if the land is sold via a joint development agreement. PAN should be mentioned in all transactions, applicable under this section. Sub-registrars have been sending us a lot of information of TDS collection and cases of evasion too, but now there’s a format which should be adhered to. This format makes it easy for IT sleuths to track cases.”

Inspector-general of registration and commissioner of stamps AS Saleem said: “Out of the Rs 5,260 crore revenue the stamps and registration department collected last fiscal, 60-70% was collected from Bangalore Urban alone. Another Rs 500 crore comes from optional registerable documents like shares and loan bonds. We’re also trying to levy stamp duty on imported goods.”

What the law says

Section 194-IA of Income Tax Act — payment on transfer of certain immovable property other than agricultural land states: Any person, being a transferee, responsible for paying to a resident (transferor), any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 1%of such sum as income-tax.

Note these

Who should pay TDS: buyer of the property

When it should be paid: before registering the property

Sub-registrars must note the permanent address and PAN of seller

In numbers

In 2010-11, 12,000 properties were registered across the state

In 2011-12, it was 3 lakh registrations

Source: The Times of India, Bangalore


Bangalore properties a bandwagon in the real estate industry

BANGALORE: With a new stable government looking to address some problems of the previous one, and with interest rates falling, Bangalore’s real estate market is looking more positive for buyers and investors than it has been in a while. Given that property prices here have been relatively stable in the past few years also makes it quite attractive.

Irfan Razack, chairman and managing director, Prestige Group, says the mood among investors is positive. “What really matters for building Brand Bangalore is good governance and good infrastructure. The ongoing projects should be completed and delivered on time and quality is likely to be maintained,” he says.

Irshad Ahmed, president, Bangalore Realtor’s Association – India (BRAI), echoes the same sentiment. However, he says infrastructure needs to be improved significantly and the Metro rail work needs to be speed up.

Builders say Bangalore is also attracting a lot of foreign buyers on account of the weakening of the Indian rupee. A weaker rupee makes Indian goods cheaper in terms of foreign currency. “It makes this the ideal time for foreign investment and Bangalore seems to be the most preferred city (for foreign buyers),” says Rajashekar, proprietor, Elegant Properties.

Home loan interest rates that had gone up to 11% and higher are now down to about 10%. Bankers expect the trend to continue given that the inflation rate is dropping. Interest rates play a big role in real estate because most buyers take large loans to finance their property purchases.

Zahed Mahmood, director in property brokerage firm Silverline Realty, notes that schemes such as where the builder bears the customer’s EMI till the project is complete, is helping to bring buyers into the market.

“Bangalore is more an end-user market rather than speculative. So it’s helping to keep prices stable,” says Mahmood.

There are concerns about the job market though. IT companies are no longer creating as many jobs as they once were. But Irshad Ahmed says this is not an immediate concern.

Realtors are looking forward to the latter half of 2013 when the Real Estate Regulatory Bill and the Land Acquisition, Rehabilitation and Resettlement Bill are expected to be passed. “The Real Estate Regulatory Bill, if passed, will help the growth of India’s realty sector. It will root out all the unethical and fly-by-night operators and enable a healthy business to emerge,” says Zahed Mahmood.

Source: The Times of India, Bangalore

Bangalore: A property investment hotspot

A growing number of NRI’s across the US prefer to invest in real estate back home due to a combination of factors. The capital appreciation in India, competitive local lending rates in the US, easing of investment norms by the government, repatriation facilities and availability of property management services are primarily instrumental in driving them to investing in real estate here.

There are many in the US observing the real estate market here. The consistent price appreciation over the years is a major draw. It is this section of prospective investors who have all been waiting in the wings all along that are now keen to get a slice of the market pie here as the US market is yet to pick up. Moreover, expatriates who are looking for a short to medium-term appreciation on investments are now entering the real estate market here. Generating funds both locally and here is much easier now for them. Yet another significant factor is the ability to raise short-term funds at negligible interest rates in the US.

In a survey conducted recently during a property show held across the US – in Edison, Dallas and Sunnyvale CA – 25 percent of the NRI visitors in Edison opted for investments in Bangalore, while it was 40 percent in Dallas and 67 percent in the Bay area, California. A significant number of NRIs in Dallas are keen on investing in leased commercial property for the rental income. Many techies in the Silicon Valley in the west coast are looking for investments in Bangalore. The employment opportunities and returns on investments here are driving them.

The Tier II cities such as Mysore and Mangalore are also drawing investors primarily for their developed plots as land appreciates much faster here. The predominant choice among US-based NRI’s in Bangalore is apartments followed by developed plots, villas, penthouses and commercial property. Both retail and office space are preferred options as rental income is now repatriable.

The survey further reveals that while 44 percent of the visitors to the shows opted for home loans in Edison, 45 percent are keen in Dallas and 51 percent are evincing interest in the Bay area. They are keen to prepay the loan and do not want to stretch till the full repayment period.

A significant factor for the surge in investments is the proliferation of property management companies who are undertaking to manage the real estate assets of NRIs during their absence. Home loan processing facilities through online and representative offices spread across select countries further encourage NRIs to enter the market with minimal financial outlay.

Yet another factor for the growing level of interest in the real estate market here is the easing of investment norms over the years. Now, NRI’s get almost all the privileges a resident has. The repatriation procedures have been considerably simplified with the apex bank decentralizing them. They can now repatriate the sale proceeds of up to two residential properties and commercial properties without restriction.

An amount of USD 1 million per year can be remitted outside India from a non-resident ordinary account (NRO). Repatriation is now handled by the authorised foreign exchange dealers themselves on submission of a certificate from a chartered accountant that all local taxes, if any due, have been remitted. However, agricultural land, farmhouse and plantation properties are still restricted.

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Source: Times Property, The Times of India, Bangalore