• Consideration value less than assessed or market value of flat

I am selling my flat. The consideration value is less than assessed or market value of flat. Is there a problem with registration of this deed ? Buyer saying he has to pay more tax.
Asked 4 years ago in Property Law
Religion: Hindu

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28 Answers

Selling of Land & Building below the Stamp Duty Value

Asseessees in order to save Income Tax makes an agreement to sell at price lower than the actual sale consideration and adjust balance amount in cash which adds to his/ her black money. In order to prevent such loss of income tax revenue Section 50C, Sec 43CA and Sec 56(2)(vii)(b) were introduced time to time which plugged this evasion to an extent.

Kishan Dutt Kalaskar
Advocate, Bangalore
6050 Answers
381 Consultations

4.8 on 5.0

Buyer needs to pay tax on basis of value fixed by government in some states it is called sub registrar value/guidelines value below that even if you sell property still purchaser needs to pay stamp duty on guidelines value.

There is no problem with registration of sale deed if your selling property below market value since market value is different from guidelines value.

Swarnarka Chowdhury
Advocate, Mysore
1878 Answers
5 Consultations

5.0 on 5.0

You have to pay stamp duty as per circle rate for flat

2) as per section 50 C of income tax act if property is sold for rate below the circle rate then circle rate would be determined to be sale price of property by income tax authorities and capital gains tax levied accordingly to the seller

3) if you claim that fair market value is below the circle rate then in such case I0 would request valuation officer to carry valuation of property

4) the valuation determined by valuation officer would be sale price of the property if valuation determined by valuation officer is lower than circle rate

5) if valuation officer determines sale price to be higher than circle rate than circle rate would be deemed to be sale price of property

6) under section 56(2) vii) in case of buyer the difference between sale price and circle rate would be determined to be the income of purchaser and taxed under head income from other sources

Ajay Sethi
Advocate, Mumbai
87917 Answers
6207 Consultations

5.0 on 5.0

As mentioned here in above difference in price would be determined to be income of purchaser

Ajay Sethi
Advocate, Mumbai
87917 Answers
6207 Consultations

5.0 on 5.0

1. The Circle Rate for the purpose of assessment of stamp duty and registration fees to be paid to the Government often differs with the market price and there is nothing unusual about this.

2. So you need not bother about the same in your case as well except that you need to pay more stamp duty than you should have paid had the consideration price was assessed by the registration.

3 However if you need any further assistance in this you may feel free to share.

Devajyoti Barman
Advocate, Kolkata
22515 Answers
402 Consultations

5.0 on 5.0

The registration of the property will be made only at the circle rate or the consideration whichever is more there is no problem in consideration is less than the market rate and you can register your property at the circle rate.

Market rates are only hypothetical rates and not considered for the registration of a property.

Vimlesh Prasad Mishra
Advocate, Lucknow
6848 Answers
23 Consultations

4.9 on 5.0

Circle rates can be defined as the minimum price at which any real estate asset has to be registered when being transferred. These rates are set by the state government and undergo revision from time to time. A buyer needs to register the property on the actual transaction value or the prescribed circle rate, whichever is higher. Usually, market rate is higher than the circle rates.

As such it is advisable not to sell property below circle rate since the purchaser needs to pay duty on circle rate or it will not be registered if it is below circle rate.

Swarnarka Chowdhury
Advocate, Mysore
1878 Answers
5 Consultations

5.0 on 5.0

In case the consideration is less then the circle rates/ the mantri rates the stamp duty shall be payable on the jantri rates.

Further for income.tax purpose for the seller and buyer under section.50C And 56 the circle rate shall be treated as rate of property for calculating capital gain and under 56 for seller the difference between sale price and circle value shall be treated as income.

Under 2018 budget 5 percent rate difference that is sale value 5 percent below the circle rate the above two sections for income tax won't be attracted.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Yes registration will be fine, just you have to pay stamp duty on circle rates.

Further for buyer that 5 lakh shall be treated as income he has to pay income.tax.on that under.sectiom 56 income.tax act

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

1) If you're selling the flat below market value than seller is in profit. Ask him to bear the taxes and additional stamp duty charges as per market value.

2) You can make in registration copy that agreement is made for 1 rupee consideration. Registrar has nothing to do with it, Registrar will only look at agreement for how much sq ft of flat or land is mentioned and from which area. Than he/ she will find current market rates as per ready recknor and will be charging stamp duty and registration charges accordingly.

Ganesh Kadam
Advocate, Pune
12335 Answers
191 Consultations

4.9 on 5.0

Stamp duty has to be paid as per circle rate

Ajay Sethi
Advocate, Mumbai
87917 Answers
6207 Consultations

5.0 on 5.0

1. You won't find any problem during registration. The stamp duty will required to be paid on the higher of market value or agreement value.

2. But there will be problem from income tax department

3. Under section 50c of income tax act, if agreement value is less than market value, then it is deemed that the property is undervalued to save capital gains tax and thus the difference is transacted in cash.

4. So this will pose a problem for seller and buyer. Seller is deemed to have received the difference in cash and buyer is deemed to have paid difference in cash and so both parties are made liable for concealment of income.

5. It is advisable to submit the sale document for adjudication to the collector of stamps for determining the fair market value of property on which stamp duty is payable. If you think that the value assessed by collector is not proper, you can appeal to the district valuation officer. Sometimes due to surrounding circumstances and the nature of the property, the value which the property fetches is less than the circle rate. So not all transactions which are below the circle rate can be tainted as being one to avoid tax by undervaluing.

6. It is advisable to keep the consideration either equal to or a little greater than the circle rate to avoid any taxation issues for both parties in future.

7. The difference in consideration ie difference between agreement value and circle rate will be added to the incomes of both the parties.

Yusuf Rampurawala
Advocate, Mumbai
6880 Answers
79 Consultations

5.0 on 5.0

This is my advise to you:

1. Why don't you sell the property at the market value?

2. If you sell at the market value the buyer will have to pay less tax;

3.If you sell a property for less than market value, the state government wants its stamp duty and alsogovernment wants its capital gains tax, both calculated on the market value at the time and not on your generous price;

4. Therefore do not sell flat at a lower rate;

5. Registration will be minimum value as prevalent in the state.

Gowaal Padavi
Advocate, Mumbai
1920 Answers
5 Consultations

5.0 on 5.0

Yes, go ahead with the registration. There would be no question of doubt.

Devajyoti Barman
Advocate, Kolkata
22515 Answers
402 Consultations

5.0 on 5.0

Dear Client,

Stamp duty will levy on govt. circle rate or sale consideration which ever is higher.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

There is no problem, just that consideration should be genuine and more than the circle rate

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

It can not be less than the circle rate.

Having an amount less than the circle rate will mean that you will have to pay less stamp duty and that can not happen

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

I advise you to purchase the same on circle rate and if not stamp duty will have to be paid on circle rate and consideration will be the same as per circle rate in the sale deed.

Regards

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

Registration will be fine and circulate as the consideration amount or market value is not considerable in this case

Vimlesh Prasad Mishra
Advocate, Lucknow
6848 Answers
23 Consultations

4.9 on 5.0

1. The buyer shall have to pay stamp duty and registration fee as per the circle rate specified by the Registration office.

2. If the buyer buys the flat at Rs.80 lakhs when the circle rate assessed is Rs.1 crore, then it will be considered by the I.Tax department that the buyer has gained Rs.20 lakhs on which they will charge Income Tax considering the said amount as his earning for the year.

Krishna Kishore Ganguly
Advocate, Kolkata
26602 Answers
726 Consultations

5.0 on 5.0

The answer posted above is very much applicable in West Bengal.

Krishna Kishore Ganguly
Advocate, Kolkata
26602 Answers
726 Consultations

5.0 on 5.0

1. The stamp duty and the Registration Fee to be paid while Registering the sale deed will be levied on the amount as assessed based on the circle rate and not on the amount your buyer is actually paying you.

2. Moreover the buyer shall have to pay Income tax on the said Rs.5 ;lakhs which will be considered as his earning in the year of the purchase of the said flat.

Krishna Kishore Ganguly
Advocate, Kolkata
26602 Answers
726 Consultations

5.0 on 5.0

Firslty, the problem arises when property sold and bought at less price in case of government land.

Secondly, in private deals there is no exclusive bar on it in law.

Thirdly, yes absolutely fine, no need to worry about anything.

Sanjay Baniwal
Advocate, South Delhi
5464 Answers
13 Consultations

5.0 on 5.0

The buyer has to bear the stamp duty according to the circle rate or government guidelines value of the property.

Why do you want to sell the property at a lesser rate.?

Whether you under value the property or sell it at the same rate, the stamp duty fixed as per the guidelines value of the property has to be paid.

The buyer need not pay taxes for buying the property

T Kalaiselvan
Advocate, Vellore
78070 Answers
1543 Consultations

5.0 on 5.0

Said flat in kolkata,west bengal

Let the property be anywhere, the buyer has to pay the appropriate stamp duty for getting the sale deed registered on his name.

T Kalaiselvan
Advocate, Vellore
78070 Answers
1543 Consultations

5.0 on 5.0

Consideration value is less by 5 lakhs than circle rate determined in my case. So registration will be fine right ?

Even if the seller is ready to under value and sell the property at an undervalued rate, the buyer has to pay the appropriate stamp duty as applicable in accordance to the prescribed circle rate value of the property.

T Kalaiselvan
Advocate, Vellore
78070 Answers
1543 Consultations

5.0 on 5.0

1. IRRESPECTIVE of the Market Value or Dealing Value, the Stamp Duty payable shall be on the rateable value of the Property, as decided by the ready recknor of the IGR (state govt).

2. The Govt. is concerned /interested in gettings its Stamp Duty on the rateble value and there shall be no legal problem in registration of the document.

Keep Smiling .... Hemant Agarwal

Hemant Agarwal
Advocate, Mumbai
5612 Answers
25 Consultations

5.0 on 5.0

If the sale consideration as mentioned in the sale deed is lower than the circle rate, the stamp duty would be calculated as per the value prescribed for circle rate, so you may mutually agree at any price, but the stamp duty would be levied, as per circle rate only and if paid, the registration would be done.

Siddharth Jain
Advocate, New Delhi
5928 Answers
101 Consultations

5.0 on 5.0

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