TDS on property purchase - sale transactions in India

Easy money days for real estate developers seems to be getting over soon as government is trying whatever it can to curb the generation and absorption of black money by the real estate sector in India. 

60 - 40 is a common terminology in real estate sector in India which means 40% of the payment towards buying a property goes via cash (unaccounted) and 60% via cheque or bank transfer. As result huge amount of black money is circulating in the system just due to the real estate sector alone. 


The real estate sector in India constitutes about 11 percent of the GDP and investment in property is a common means of parking unaccounted money and a large number of transactions in real estate are not reported or are under-reported.

In order to check generation of black money in the real estate sector, the government's White Paper on black money has suggested introduction of tax deduction at source (TDS) on sale-purchase of properties. One of the measures for deterring use of the real estate sector for generation and investment of black money could be the provision of deducting tax at source on payments made on real estate transactions and mandating it as a pre-condition for registering of the transacted property, the paper said.

The report noted that due to rising prices of real estate, the tax incidence applicable on real estate transactions in the form of stamp duty and capital gains tax can create incentives for tax evasion through under-reporting of transaction price. This can lead to both generation and investment of black money.


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