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Purchase of property below the govt rates

Neil Gore (other) (33 Points)

08 January 2018

The ready reconer rates stated by government are higher than the actual rates in some areas. If the purchaser buys a proerty for 20 Lakhs where as the govt rate of ready reckoner is 30 Lakh, what are the income tax implications for the seller and purchaser?

Is the following report true in this context?

https://timesofindia.indiatimes.com/business/india-business/Bought-flat-below-stamp-duty-value-You-may-escape-tax-on-differential/articleshow/50646480.cms

(TOI: Bought flat below stamp duty value? You may escape tax on differential)

Thanks.

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2 Replies

Rakesh Bandal (Self Employed and Agriculture) (1349 Points)
Replied 08 January 2018

The link which you have given shows error (articles published in news paper can not be taken as base material in th court of law)

if you purchase property below government valuation and you receive a notice from govenment department, then you have recourse to valuation office , he can find out current valuation based on conditions and location of the property

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Neil Gore (other) (33 Points)
Replied 16 January 2018

Thaks for your reply.

Here's the link again:

https://timesofindia.indiatimes.com/business/india-business/Bought-flat-below-stamp-duty-value-You-may-escape-tax-on-differential/articleshow/50646480.cms

Also, copying the article below for your reference. Your reply is welcome.

Bought flat below stamp duty value? You may escape tax on differential

Lubna Kably| TNN | Updated: Jan 20, 2016, 02:12 IST

MUMBAI: Property buyers may have much to cheer about if a recommendation by the Income-Tax (I-T) Simplification Committee, led by retired Justice R V Easwar, is accepted. If they have purchased a property for significantly lower than the stamp duty value, they will not be taxed on the differential, as the relevant I-T provision is proposed to be dropped.

Each state has a pre-decided minimum value on which stamp duty is payable. Even within the same city, tony areas have a higher pre-decided value. In common parlance, such value is referred to as the stamp duty value. Currently, if a buyer purchases a property for a price below the applicable stamp duty value and the difference between the price of the property that has been paid and the stamp duty value is more than Rs 50,000, then such a difference is assumed to be the income of the buyer.

It is taxable in the hands of the buyer, as 'Income from other sources' (see table). The tax rate will be the applicable rate (including surcharge and cess), depending on the tax slab the buyer falls in. The maximum marginal rate of tax is 34.61% for those having a taxable income of more than Rs 1 crore.

Tax experts say the intention of introducing this provision - which came into effect from April 1, 2014 - was to curb black money , which is pumped into real estate deals. However, the I-T panel points out: "This tax provision, viz: section 56(2)(vii)(b)(ii) works on the assumption that the buyer of the property would have paid consideration more than the stated consideration. This presumption is not in accordance with judicial interpretation and therefore deserves to be deleted."

A real estate research adds that: "In recent times, in many regions, property prices have widely fluctuated. At the same time, states have been hiking the stamp duty value. Thus, the proposal by the I-T Simplification Committee is welcome."