Proposal on TDS exemption in recovered properties under review

As per Section 194-IA of the Income Tax Act, TDS at the rate of 1 percent is deducted from the consideration of the transfer of an immoveable property exceeding Rs 50 lacs. When a bank and lender sells a property that has been recovered from a loan defaulter, it become obligated to pay this 1 percent which in turn can be claimed back by the loan defaulter via the prevailing system. This is causing much heartache amongst lenders who feel they are being cheated out of money that is rightfully owed to them, only for the debtor to be able to claim it back from the current system. Therefore, they have put forth a recommendation to the current government to create a provision in this regard for properties that have been seized and sold to recover unpaid dues.

The issues mentioned in the proposal have been discussed in several meetings called by the finance minister in the last month. There are considering the matter seriously and are likely to provide some answers shortly. Banks want the current authorities to recognise the anomaly and carve out an exception for financial institutions in this regard to limit their exposure to financial losses. At present the current system has created an unintended way for defaulters to benefit, instead of helping financial situations penalise and recover as much of their pending dues as possible.

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Proposal on TDS exemption in recovered properties under review

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