Finance Minister Pranab Mukherjee announced removal of the proposed one per cent TDS (tax deduction at source) on transfer of immovable property.
In a bid to tighten screws on black money in the realty market, the government had proposed one per cent TDS (tax deduction at source) on transfer of immovable property if the sale value exceeded Rs.50 lakh in urban centres and Rs. 20 lakh in other areas.
The measure, proposed in the Budget, was announced to "deter the generation and use of unaccounted money", Finance Minister Pranab Mukherjee had said in his Budget speech.
However, industry body Confederation of Indian Industry (CII) and experts had criticized the move. The apex realty body CREDAI too said that this would lead to increase in property prices.
Meanwhile, CII had said that the government should remove tax deduction at source (TDS) norm for the bonds floated by companies in order to strengthen the corporate bond market.
The application of TDS was to be effective from October 1 this year. It had been provided that transfer of property would not be registered unless the buyer furnishes proof of deduction and payment of TDS. Immovable properties, other than agricultural land were to be covered under the provision.
At present, tax is required to be deducted at source by the transferee on transfer of immovable property by a non-resident.
The new proposal had intended to collect tax at the earliest point of time and have a reporting mechanism of transactions in the realty sector.
The provision would have applied if the consideration exceeds Rs. 50 lakh if property is situated in "specified urban agglomeration" and Rs. 20 lakh if property is situated in any other area.
With inputs from PTI