THE GOVERNMENT HAS APPROVED THE INSTITUTION OF A REGULAR VALUATION CELL FOR THE REGULAR VALUATION OF PROPERTIES ACCORDING TO MARKET PRICES OF THE PROPERTIES FOR THE REGISTRATION. IT IS EXPECTED THAT THE GENERATION OF REVENUE FROM THE REVALUATION OR REVISION OF THE GUIDANCE VALUE ACCORDING TO THE MARKET TRENDS OR MARKET PRICES, WILL BE AROUND RS6500 CRORES, A JUMP OF ALMOST RS2000 CRORES FROM THE ESTIMATED REVENUE.
THE GOVERNMENT IS SERIOUS ABOUT INCREASING THE STAMP DUTY ON THE REGISTRATION OF PROPERTIES AND THE GUIDANCE VALUE MIGHT BE BROUGHT TO THE MARKET RATE COUPLED WITH 1% TDS ON THE VALUE OF THE PROPERTIES WHICH EXCEED RS 50 LAKHS AND ABOVE, AS PER THE RECENT FINANCE ACT, WILL INCREASE THE PRICE OF THE REALTY MARKET IN BANGALORE.
IN ORDER TO GENERATE ADDITIONAL REVENUE TO MEET THE DEFICIT OF THE BBMP, THE PROPERTIES WHICH ARE IRREGULAR WITH DEVIATION AND VIOLATION MAY BE BRANDED DIFFERENTLY AND TAXED ACCORDINGLY TILL IT GETS REGULARISED AND THE TAX SLABS MUST BE 3 TIMES GREATER/HIGHER THAN THE OTHER PROPERTIES.
This proposal may not be practical as there will be stiff opposition from the VIOLATORS AND DEVASTATORS.
RBI HAS DIRECTED ALL THE BANKS NOT TO OVER VALUE THE PROPERTIES WHICH INCLUDES STAMP DUTY, REGISTRATION FEE, SERVICE TAX, VAT AND OTHER ADDITIONS, WHILE PROCESSING THE HOME LOANS, AS THE REGULATOR RECEIVED COMPLAINTS OF SUCH DISCREPANCIES BY SOME OF THE BANKS.
THE INCOME TAX DEPARTMENT IS EXAMINING THE HOME LOANS APPLICATIONS AND SANCTIONS AS IT IS NOTICED THAT MANY ASSESSEES HAVE FILED THE TAX RETURNS, WHICH HAVE SOME UNDISCLOSED TRANSACTIONS, TO AVOID THE PAYMENT OF TAXES.
THE BUYERS ENTER INTO AN AGREEMENT OF SALE WITH THE BUYER FOR XXXXX PRICE AND SUBMIT THE SAME FOR HOME LOAN SANCTION AND REGISTER THE SAME PROPERTY FOR THE LESSER VALUE TO AVOID OR EVADE INCOME TAX, STAMP DUTY AND REGISTRATION FEE. THE INCOME TAX DEPARTMENT IS COLLECTING INFORMATION OF SUCH TRANSACTIONS AND TAX EVADERS WILL BE PENALISED. THEHOME LOAN BUYERS ENTER INTO A SALE AGREEMENT FOR THE ACTUAL VALUE OF THE PROPERTY OR HIGHER VALUE OF THE PROPERTY TO AVAIL LOANS AND AT THE TIME OF REGISTRATION, REGISTER THE SAME FOR LESSER VALUE TO EVADE INCOME TAX, SALES TAX, SERVICE TAX, STAMP DUTY AND REGISTRATION FEE.
PROPERTY BUYERS WHO HAVE AVAILED LOAN HAVE ALSO ENTERED INTO SEVERAL DUBIOUS AGREEMENTS AND THE BUILDERS COLLECT THE PAYMENT UNDER VARIOUS HEADS AND IN DIFFERENT NAMES, BUT ARE CAUGHT, AS THEY HAD ENTERED INTO THE AGREEMENT OF SALE AND THESE ARE OFFICIALS DOCUMENTS, BASED ON THESE DOCUMENTS THE LOAN IS SANCTIONED.
THE DEPARTMENT OF STAMPS AND REGISTRATION HAS NOTIFIED THE REVISED VALUE FOR THE PROPERTY REGISTRATION IN BANGALORE RURAL DISTRICT AND RAMANAGARAM DISTRICTS FROM TODAY. THE REVISION IS IN THE RANGE OF 30% TO 150%. THE REVISED VALUES FOR THE BANGALORE URBAN DISTRICT HAS NOT YET BEEN FINALISED AND IS UNDER CONSIDERATION WILL SOON BE NOTIFIED.
IT IS RELIABLY LEARNT THAT THE PROPOSED REVISION OF GUIDANCE VALUE OR THE VALUE AT WHICH THE STAMP DUTY IS COLLECTED FOR THE REGISTRATION HAS NOT YET BEEN NOTIFIED. THE GOVERNMENT IS WAITING FOR THE NEW REVENUE MINISTER TO TAKE UP THIS ISSUE AND NOTIFY THE SAME. THE BUYERS CAN HAPPILY REGISTER THEIR PROPERTIES AT THE OLD RATES TILL FURTHER ORDERS.
THE SELLERS ARE IN GREAT MOOD HOPING THAT THE PRICES OF THE PROPERTIES HAVE GONE UP WITH THE REVISION OF GUIDANCE VALUE. THIS IS A MISCONCEPTION. IN REALITY, THERE WILL NOT BE GOOD DEMAND FOR THE PROPERTIES DUE TO THE REVISION AND INCREASE.
THE REASONS ARE:
THE SELLERS HAVE TO PAY ADDITIONAL STAMP DUTY AND REGISTRATION FEE TO THE EXTENT OF THE INCREASED VALUE.
THE SELLERS MUST ALSO HAVE INCOME TAX (ACCOUNTED MONEY) TO THE TUNE OF THE GUIDANCE VALUE.
NORMALLY ALL THE PROPERTIES ARE UNDERVALUED TO EVADE STAMP DUTY AND REGISTRATION FEE AND THE MOST IMPORTANT ASPECT IS THAT THE INCOME TAX DEPARTMENT TREATS OR ASSESSES THE VALUE OF THE PROPERTY AS PER THE GUIDANCE VALUE OR THE GOVT VALUE OR IF THE VALUE OR CONSIDERATION IS PAID ABOVE THE GOVT/GUIDANCE VALUE AND NOT FOR THE VALUE SHOWN IN THE SALE DEED.
IN CASE, IF THE SALE VALUE OR CONSIDERATION SHOWN IS LESS THAN THE GUIDANCE/GOVT VALUE, THE INCOME TAX DEPARTMENT WILL LEVY PENALTY AND ASSESS IT TO THE TAX PURPOSE AT THE GUIDANCE VALUE.
DUE TO THE AFORESAID FACTORS, THE PRICES WILL NOT INCREASE BUT WILL DEFINITELY HAVE A DISCOURAGING TREND.
WITH THE REVISION ALL THE REVENUE AND(GOLMA)L PROPERTIES WITH( BOGUS) GPA ARE IN QUANDRY. EVEN, IF THEY UNDERGO SURGERY UNDER AKRAMA-SAKRAMA, THE PENALTY WILL BE BASED ON THE GUIDANCE VALUE. IF ANY OF THESE GPA PROPERTIES HAD TO BE REGISTERED NOW, IT WILL BE AT THE NEW REVISED GUIDANCE VALUE.
THE GOVERNMENT OF KARNATAKA HAS REDUCED THE STAMP DUTY ON THE SALE AGREEMENT OF APARTMENTS FROM 01-04-2011 TO 0.1% ON THE SALE CONSIDERATION, BUT HAS INCREASED THE STAMP DUTY ON THE JOINT DEVELOPMENT AGREEMENTS.
Effective 1/10/2009, difference of over Rs. 50,000 between fair market value and purchase value of immovable property will be taxed as income from other sources in the hand of the buyer if buyer is an individual or HUF. Property is as defined in Section 56 and includes immovable property, jewellery, shares and securities, work of art, drawings, paintings etc.
In case seller is a relative as defined in this same section, the difference in value will not be taxed. However, you have to produce to the AO an Affidavit from Seller establishing that he or she is your relative and that the property is being sold to you for a consideration of lower than the market value. This affidavit has to be stamped as per law of the state having jurisdiction of the AFFIDAVIT (not necessarily the same as state where the property is located). the stamp duty and registration of the immovable property is payable at the value assessed by the state of location of the immovable property.
For fair market value:-
1) Value determined by stamp duty officer for immovable property.
2) Gold and silver jewellery value will be as per date of sale of the jewellery . Ditto for Shares and Securities if listed. If not listed, a valuation will have to be carried out for these properties.
3) Works of Art, Drawings and Paintings will be as per value determined by valuation officer and may always be subject to litigation.
This is indeed a double whammy as Government has resorted to double taxation to curb black money menace. The seller of property already has to pay CG Tax based on the value determined by stamp duty officer if higher than sale price. The buyer of the property has to pay the tax on IFOS if aggregate difference on all properties purchased by him + other credits is over Rs. 50,000 in a year.
It may be better if buyer pays fair market value to seller so both will save on taxes.
Buyers are advised to consult Chartered Accountants before the purchase of properties.