One week left for IDS 2016

The Due Date is 30th September, 2016 and hardly ONE week left. No Extension expected as already Tax Audit etc. Due Date extended upto 17th October, 2016 to ease Assessees, Tax Professionals and Accounts Personnel.

CBDT has issued 2 Benevolent Notifications and Assessees who have to Declare Immovable Property have been given a leeway .

1. Notification dated 12th August, 2016 2nd  Amendment of  Rules and the amendment is as follows:

“3. In the principal rules, in Form-2, after the table, for the portion beginning with the words “The declarant is hereby directed” and ending with the words “shall be deemed never to have been made.” the following shall be substituted, namely:-

“The declarant is hereby directed to make the payment of sum payable as per column (5) of the above table, as specified below:-

(i) an amount not less than twenty-five per cent. of the sum payable on or before 30th day of November, 2016;

(ii) an amount not less than fifty per cent. of the sum payable as reduced by the amount paid under clause (i) above on or before 31st day of March, 2017;

(iii) the whole of the sum payable as reduced by the amount paid under clause (i) and (ii) above on or before 30th day of September, 2017.

In case of non-payment of the amount as specified above, the declaration under Form-1 shall be treated as void and shall be deemed never to have been made.”.-------

2. Notification dated 17th August, 2016 3rd Amendment of  Rules and the amendment is as follows:

-------“2. In the principal rules, in rule 3, in sub-rule (1), in clause (d), after sub-clause (II) following shall be inserted, namely:-

‘Provided that where the acquisition of immovable property by the declarant is evidenced by a deed registered with any authority of a State Government, the fair market value of such property shall, at the option of the declarant, may be taken on the stamp duty value as increased by the same proportion as Cost Inflation Index for the year 2016-17 bears to the Cost Inflation Index for the year in which the property was registered:

Provided further that where the immovable property was acquired before the 1st day of April, 1981, the provisions of the first proviso shall have effect as if for the words “stamp duty value”, the words “the fair market value of the property as on 1st day of April, 1981 on the basis of the valuation report obtained by the declarant from a registered valuer”, and for the words “Cost Inflation Index for the year in which the property was registered”, the words “Cost Inflation Index for the year 1981-82” had been substituted.

Explanation- For the purposes of this clause,-

(i) “stamp duty value” means the value adopted or assessed by any authority of the State Government for the purposes of payment of stamp duty in respect of an immovable property;

(ii) “Cost Inflation Index” means such index as notified under clause (v) of

Explanation to section 48 of the Income-tax Act, 1961.

CBDT Circular No 29 of 2016 dated 18th August ,2016 Question 5 and Answer are as follows:

“Question No.5: What will be the value of immovable property to be declared under the Scheme in a case where the cost of immovable property is only partly evidenced by a registered deed and partly otherwise?

Answer: In such a case, the option of calculating the fair market value of the immovable property based on applying the cost inflation index to stamp duty value shall be available only in respect of that part of the property the cost of which is evidenced by a registered deed. With regard to the remaining part the fair market value of the property shall be determined based on the provisions of rule 3(1)(d) of the Rules without taking into effect the proviso to the said rule. The said situation is illustrated as below:-

Suppose, Mr. ‘X’ purchased a piece of land in year 2004-05 for Rs.10 lakh, however the stamp duty value was Rs.15 lakh. Thereafter, in the period 2005-06 to 2007-08, Mr. ‘X’ constructed a two storeyed house on the said land. The amount to be declared in respect of the said property shall be (A + B) where

A= Value of land (if the assessee opts for valuation on the basis of indexation) shall be Rs.15 lakh x cost inflation index of 2016-17 cost inflation index of 2004-05

B= Fair market value of the house (excluding value of the land) as on 01.06.2016 as determined by the registered valuer or the cost of construction whichever is higher.

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I would like to explain the benefit of above Notifications by 2 Case Studies, as follows:

A) One Acre Land at Bye-Pass Road, Gudivada, Krishna Dt, A.P
(Rs in Lakhs)

A) One Acre Land at TULLUR /CRDA _A.P

From the above case studies, it is observed that Tax + Krishi Kalyan Cess + Penalty of 45% of Indexed Cost works out in the range of 0.06% to 24.72% of Fair Market Value, depending on the Parameters, Values.

In addition, if 3 instalments availed at 12% Rate of Interest another reduction upto 2.7% i.e., Only 42.3% payable and the same translates to 0.056% to 23.456% of Fair Market Value ONLY is Payable.

In view of the above, I recommend to Arise, Aware and Avail IDS 2016 in order not to Invite MUSIC later.