Warning! Lodha Flat Buyers may face Income Tax Nightmare

Mumbai, 20th November 2017: Buying a flat from Lodha Group can land you in deep trouble with the Income Tax Department. The small print in Lodha Group's Application Form compels you to not deduct TDS on your installments as required by law. Lodha's sales staff and Application Form illegally compels you to delegate your legal responsibility to Lodha. Such delegation can land you in deep trouble. Not only will you invite penalties from the Income Tax authorities, but worse, it can lead to scrutiny of your tax returns. Nobody in his right mind wants to invite I-T scrutiny through careless actions, but that's what can happen to you if you blindly trust Lodha's paperwork! 

As a flat purchaser, you have a statutory obligation under section 194-IA of the Finance Act to deduct tax and furnish details of your property transaction to the Income Tax department. There are no exemptions. Read this article to understand your obligation as a flat-purchaser. There is no provision allowing you to transfer this legal obligation to the builder!

TDS needs to be deducted each time while paying the installment, and it needs to be deposited by way of return-cum-challan (Form 26QB) within seven days of the following month of making the payment. Failing to do so can attract late filing interest of 12 % per annum, plus a penalty of upto Rs 1 lakh under Section 271H.

For example, if the consideration value of your flat is Rs 2 crore, then TDS @ 1% would  be Rs 2 lakh. Failing to deduct and remit this amount yourself can make you liable to pay late filing interest of Rs 2,000 for every month of delay.  Here is a specimen of the I-T notice you are liable to receive.

It is possible that Lodha's accountants will pay the TDS on your behalf, but this convenient arrangement is at your risk, not Lodha's. If Lodha's CAs default, then you will receive the notice and pay the fine. Moreover, Lodha may refuse to allow the TDS deduction, with the result that you will pay the TDS amount and fines from your own pocket!

WHAT LODHA'S APPLICATION FORM SAYS:

Check out page 5 of Lodha Group's obnoxious Application Form. It says this:

"The Applicant has authorized Lodha to pay TDS on his behalf. The Applicant acknowledges that the TDS will be payable by the Company only in the name of the Primary Applicant. In the event the applicant wishes to pay the applicable TDS on his own, a written request to the effect shall be given to the company on tds@lodhagroup.com, and thereafter the applicant shall submit the Challans for payment thereof to the Company within 7 days of the relevant due date for payment of TDS, failing which a tracking charge of Rs 1000/- per challan per month shall apply."

WHAT ARE THE IMPLICATIONS?

Firstly, signing the Application Form quietly removes the power of the home buyer to deduct TDS from the amount payable to Lodha. The only acceptable lawful position is that that the buyer will deduct TDS and remit it. Lodha's Application Form makes it the default position that the buyer will NOT deduct TDS, leaving it to the builder to do so. Lodha incites you to commit an offense that will land you in trouble with Income Tax authorities. (Remember, Lodha Group will not face any consequences for this, because it is your legal obligation, not Lodha's!)

Secondly, in the Application Form, Lodha threatens to illegally penalize you @ Rs 1000 per month per challan if you insist on deducting and paying the TDS yourself, if you are not prompt in giving the challan to Lodha. This fine is gratuitous, because the law puts the onus on you to do so promptly! The law states, "Every person responsible for deduction of tax under section 194-IA shall furnish the certificate of deduction of tax at source in Form No. 16B to the payee within fifteen days..."

 

Thirdly, the motive for Lodha's actions appear to be illegal. The question arises: why is Lodha going out of its way to coerce, threaten and dissuade flat-buyers who wish to fulfill their legal obligation? The most plausible explanation is that Lodha Group is trying to avoid disclosing certain key facts and figures to the flat-buyer and possibly, the Income Tax department also. Also, it is likely that Lodha is partially evading taxes in this way. As the clause in the Application form is underhand and sneaky, the motives appear to be illegal. Income Tax authorities should carry out a probe to find out what Lodha is hiding!

ISSUED IN PUBLIC INTEREST
Krishnaraj Rao
9821588114
krish.kkphoto@gmail.com

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Also read:

1. How Lodha Group's "Application Form" Traps Unwary Customers

2. Measure your flat, Lodha Group has cheated you

3. Lodha Group is defrauding flat buyers in Carpet Area

4. Lodha Fiorenza – Misleading RERA, Blindfolding Flat Buyer