Those selling immovable property without disclosing their permanent account number (PAN) are in for a tough time with the government mandating a 20% tax deduction at source (TDS) in such transactions.

The new rules that came into effect from Saturday require buyers of immovable property,other than agricultural land,to pay TDS of 1% of the deal size for transactions in excess of Rs 50 lakh.

The proposal,which was announced in the budget,was notified on Friday,income tax (I-T ) department officials said.The move is part of the governments drive to clamp down on black money in the system,with real estate transactions seen as one of the major sources of generation of black money.

While the rules would result in a check on the white component of the transaction,as often sellers insist that a large part of the consideration be paid in cash to avoid payment of capital gains tax.In many cases,where the seller has undisclosed income,cash comes into play and the share can be as high as 50%.The deal size is also under-reported to avoid stamp duty.

The income tax department is hoping that through the latest measure,at least some part of the cash economy would come under check although it already has information of property transactions above Rs 30 lakh.

The rules notified on Friday require all buyers to deposit the 1% TDS electronically on the income tax department's website by filling a form online.Those without access to the online system can fill up the form and make the payment at an authorized bank branch. The buyer,who deposits the amount,can generate the TDS certificate from department's website and provide it to the seller.

The seller would also be able to see the tax deduction at source credit in his statement,said an official.

Source - Times property (The Times of India) June 2nd 2013 issue