Banks seek exemption from TDS while selling mortgaged property
June, 12th 2014
Banks have sought exemption from tax deducted at source (TDS) when they sell mortgaged property to recover loans.
They have pitched for this exemption with the finance ministry as their recovery from sale of mortgaged properties gets reduced to the extent of the TDS.
This demand comes in the backdrop of the gross non-performing assets (NPAs) of banks rising from 3.5 per cent of the total loans to 4.4 per cent as at December-end 2013, in view of the slowdown in the economy.
According to the central bank, the NPA increases have been more pronounced in the case of public sector banks. According to Section 194-IA of the Income Tax Act, any person, being a transferee (buyer), responsible for paying to a resident transferor (seller), any sum by way of consideration for transfer of any immovable property (other than agricultural land), is required to deduct an amount equal to one per cent of the sum as income tax, at the time of credit of the sum to the account of the transferor.
TDS is not applicable when the consideration for the transfer of an immovable property is less than ?50 lakh. Immovable property means any land (other than agricultural land), building or part of a building. Section 194-IA was introduced by the Government in the Income Tax Act with effect from June 1, 2013.
TDS is one of the modes of collection of taxes, by which a certain percentage of a transaction amount is deducted by a person at the time of making/crediting certain specific nature of payment to the other person, and the deducted amount is remitted to the Government account.
TDS is similar to “pay as you earn” scheme also known as withholding tax in many other countries. It ensures regular inflow of cash resources to the Government.
It acts as a powerful instrument to prevent tax evasion.