I am going through the purchase of a small residential apartment & has secured the sanction of PSU Bank Home Loan to part finance the purchase. I have paid all the monies from my side and only the home loan amount is pending to be paid to the builder. This will be paid/disbursed by the bank only after the registration.
The sale consideration amount is Rs. 66 L. But the State Govt has fixed a guidance value for which alone the registration can be done. In my case the registration value comes to about Rs. 74 L. The sale deed will also show only the consideration value as Rs. 66 L. Only the stamp duty and registration fee would be based on Rs. 74 L. Builder would be in receipt of only Rs. 66 L.
The builder is insisting now that the difference of Rs. 8 L would be considered as excess income for him / his partnership firm. He is also insisting that I pay the income tax on this difference of Rs. 8 L for him.
Since he is in receipt of only Rs. 66 L, why would I be liable to pay his income tax on the difference of Rs. 8 L.
I am extremely distressed by this unreasonable demand from the builder. As it is I am finding difficult to pay the stamp duty & registration fee.
Kindly help me clarify this and enable/empower me to counter my builder's unjustified claim. Shall be very grateful for your kind advise and inputs.
10 August 2024
In the scenario you described, the key issue revolves around the discrepancy between the sale consideration and the guidance value, and the implications of this difference. Here’s a detailed explanation of the situation and how to address the builder’s claim:
### **1. Understanding Sale Consideration vs. Guidance Value**
- **Sale Consideration**: This is the amount agreed upon between the buyer and the seller for the purchase of the property, which in your case is Rs. 66 Lakh.
- **Guidance Value**: This is the minimum value set by the state government for the purpose of registration, which is Rs. 74 Lakh in your case. Stamp duty and registration fees are calculated based on this guidance value.
### **2. Income Tax Implications for the Builder**
- **Builder’s Income**: The builder’s income is derived from the actual consideration received, which is Rs. 66 Lakh. The difference between the guidance value and the sale consideration (Rs. 8 Lakh) is not part of the actual consideration received by the builder and therefore should not be considered as his income.
- **Tax on Difference**: The Rs. 8 Lakh difference is a result of the guidance value being higher than the sale consideration. It does not constitute additional income for the builder. Instead, it is a matter of regulatory compliance for calculating stamp duty and registration fees.
### **3. Legal and Practical Aspects**
- **Stamp Duty and Registration Fee**: The stamp duty and registration fee are indeed based on the guidance value (Rs. 74 Lakh) as per state regulations, and this cost is typically borne by the buyer.
- **Builder’s Demand**: The builder’s demand for you to pay income tax on the Rs. 8 Lakh difference is not valid. Income tax on property transactions is based on actual transaction amounts and the profit made by the seller. Since the builder is only receiving Rs. 66 Lakh, he should not be liable to pay tax on the Rs. 8 Lakh difference.
### **4. Steps to Address the Issue**
1. **Clarify the Situation**: Explain to the builder that the Rs. 8 Lakh difference is related to the guidance value and is not an additional amount that he is receiving. Therefore, it should not affect his taxable income.
2. **Consult a Tax Professional**: Seek advice from a tax consultant or lawyer who specializes in real estate transactions. They can provide a detailed explanation and help you address the builder’s claims.
3. **Ensure Proper Documentation**: Make sure that all documents reflect the actual transaction amount and that the sale deed is accurately prepared. Keep records of all communications and transactions related to the property purchase.
4. **Contact Authorities if Needed**: If the builder continues to make unreasonable demands, you can contact the relevant state or local authorities to seek clarification on the guidance value and the proper process for registration.
### **Summary**
You are not liable to pay income tax on the Rs. 8 Lakh difference between the sale consideration and the guidance value. This difference is a matter of regulatory compliance for calculating stamp duty and registration fees and does not constitute additional income for the builder. The builder's claim is not justified, and you should clarify this with him, seeking professional advice if necessary.
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