The government is looking at a bank proposal to exempt the sale of mortgaged real estate to lenders for the purpose of recovering bad loans through an auction from tax deduction at source, or TDS.
If the consideration for the immovable property transfer is greater than 50 lakh rupees, Section 194-IA of the Income Tax Act requires TDS to be subtracted at a rate of 1%. Lenders have argued before the government that such sales shouldn’t be subject to TDS.
“According to the banks, this causes a loss of 1% of the property’s market value during the recovery process. The issue is being thought upon, “a representative who is informed of the discussions said. ”
The loan defaulter is claiming benefits of 1% of the property’s sale price, according to the banks, and they require that this be addressed.
The person noted that the topic had come up during conversations at a meeting the finance ministry had summoned last month on sector issues, including loan recovery.
According to a different senior bank executive, lenders have requested that a special exemption be given in these circumstances.
“This will accomplish two things. First, the defaulter won’t receive any benefits, and second, the bank won’t suffer any financial losses “He said, noting that banks might also give tax authorities information about such transactions.
According to experts, the way that current regulations are now legislated in relation to how confiscated items are conveyed or sold by banking firms, including banks, results in this situation, in which the defaulter appears to benefit.
According to Vikas Vasal, national managing partner-tax at Grant Thornton Bharat, “to address this anomaly, an exception should be carved for banking firms for a tax deduction on the purchase of properties in such instances, so that they are not worse off.”
