The State Government has increased the Guidance Value or the Circle Rates or the Market Price of the property in Bangalore Urban, Bangalore Rural District and Ramnagar District with 15 days notice to submit the objections, if any, with supporting documents or evidence.
In some areas, the increase is very steep and on an average the increase is around 10% only. The consequent effect will be strain the buyers. With this increase, the Income Tax, VAT, Service TAx and Capital Gains tax will also goes up, indirectly.
The Income Tax department is also scrutinising many transactions, wherein the buyers in collusion with the sellers/agents/builders have underquoted the property consideration below the guidance value. The department may initiate penal action on such buyers and sellers soon. The Guidance Value is treated as the Fair Market Value. The property value or consideration must not be less than the guidance value as per the Finance Act.
THE REVISED CIRCLE RATES/MARKET RATE/GUIDANCE VALUE FIXED BY THE VALUATION COMMITTEE WILL BE EFFECTIVE FROM 08-08-2013.
THE NEW PROPERTY VALUES WILL FORM THE BASIS FOR THE CALCULATION AND PAYMENT OF STAMP DUTY AND REGISTRATION FEE AT THE TIME OF REGISTRATION. THIS GUIDANCE VALUE IS THE FAIR MARKET VALUE AS PER THE FINANCE ACT AND IT WILL BE CONSIDERED AS THE PROPERTY VALUE BY THE INCOME TAX DEPARTMENT FOR ITS EVALUATION AT THE TIME OF ASSESSMENT.
TAX DEDUCTED AT SOURCE (TDS) ON THE PROPERTY TRANSACTIONS ABOVE THE VALUE OF RS50 LAKHS IS EFFECTIVE FROM 01-06-2013, A NOTIFICATION TO THIS EFFECT IS PLACED BY THE INCOME TAX DEPARTMENT. THIS NOTIFICATION IS NOT APPLICABLE TO AGRICULTURAL LANDS.
ONLINE TDS PAYMENT IS AVAILABLE AND THOSE, WHO CANNOT ACCESS IT, CAN MAKE/DEPOSIT THE TAX IN THE AUTHORISED BANKS.
THE VALUE OF THE PROPERTY IS CONSIDERED ON THE GUIDELINE VALUE PUBLISHED BY THE DEPARTMENT OF STAMPS AND REGISTRATION OR THE CONSIDERATION AMOUNT, WHICHEVER IS HIGHER.
THE STATE GOVERNMENT MAY REVISE THE GUIDELINE VALUES OF THE PROPERTIES AND MIGHT INCREASE THE STAMP DUTY ON THE REGISTRATION OF PROPERTIES IN KARNATAKA, VERY SOON.
FAIR MARKET VALUE OF PROPERTIES FROM 01-10-2009
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.