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Circle rate higher then market rate of old flat

lexbery (d) (227 Points)

12 January 2021

Dear All,

A client has a old flat bought in 1988 and is selling it now for 50 Lacs, but the circle rate is showing the value of the flat as 75 Lac.

how to proceed with the sale of the said flat without income tax questioning the transaction, as i understand only 5% difference between circle rate and sale price is allowed?

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3 Replies

subham tekariwal (nil) (35 Points)
Replied 12 January 2021

I think it has been increased to 10%. Further if the circle value is inflated, we can proceed with the actual receipt and challenge the valuation later in if scrutiny falls

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ayusmita (Tax consultant) (5885 Points)
Replied 12 January 2021

Yes as per the new rule circles rate and sale rate different will be 5% then allowable
if not then capital gain calculation will be done taking circular rate not as per sold rate
and The buyer has to pay stamp duty on registration value which cannot be lower buyers the circle rate besides that buyer also pay tax on the difference of amount that is circle rate minus market rate under section 56(2) of income tax act as it considers as a profile to a buyer profit
as per the budget of 2018

Kapadia Pravin (17259 Points)
Replied 12 January 2021

Circle rate will prevail and tax calculated accordingly for buyer and seller. This year I think from a buffer rate of 5% , it is 10% in view of Covid.