• Selling rate less than guidance value set by Government

Hi Experts , 

I am planning to buy a flat in Bangalore. The guidance value of the property is 5735 per sqft. But the builder is selling that flat to me @ 4900 per sq ft. Though his documents are all fine and the project has received Occupation Certificate , but i am confused if there would be any legal issue in this deal .
Asked 4 years ago in Property Law
Religion: Hindu

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19 Answers

1. If you pay stamp duty and registration fee on the guidance value eventhough you are buying it for a lesser rate, then you may not anticipate any problem with the property on account of this.

2. Since you are confident of the documents related to the property, as per your narration, you can go ahead.

Shashidhar S. Sastry
Advocate, Bangalore
4166 Answers
258 Consultations

5.0 on 5.0

This is my response to you:

1. The property can be sold between the guidance value and the market value;

2. The property cannot be sold less than the guidance value;

3. The builder is doing so to save on tax implications;

4. You on the other hand will have to pay stamp duty at guidance value;

5. You can also approach a CA and ask about the tax implications of the same;

6. Not only seller but also the buyer will be at loss if he/she agrees to buy (makes agreement of) at a value below the Stamp Duty Value because of the operation of Section 56(2)(vii)(b) of the Income Tax Act, 1961. According to the said section if the stamp duty value exceeds the purchase consideration by more than Rs.50,000 then, the difference between the Stamp Duty Value and the Purchase Consideration will be treated as Income u/h Other Sources.

Gowaal Padavi
Advocate, Mumbai
1920 Answers
5 Consultations

5.0 on 5.0

This is in further response to you:

1. Yes you will need to pay tax for that difference in amount;

2. This will be computed by your CA who can assist you further on this;

3. This sale would actually be complicated for you, so ask for the reason why the builder is selling at such low price

Gowaal Padavi
Advocate, Mumbai
1920 Answers
5 Consultations

5.0 on 5.0

Assuming that the tax you are referring to is Income Tax, you needn't pay for the difference between the guidance value and the selling rate if you are showing the consideration of the property in the sale deed as @ Rs.4900/- per sft.

Shashidhar S. Sastry
Advocate, Bangalore
4166 Answers
258 Consultations

5.0 on 5.0

you may buy and sell a property at any mutually agreed price but the fact is that when you go to register the said property in the office of the sub-registrar, you would find that the official, supposed to register your property deal, would compare the sale consideration as mentioned in the sale deed with the fair market value of the property. The rate so fixed is known as the “circle rate”. Now 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

Ajay Sethi
Advocate, Mumbai
87901 Answers
6207 Consultations

5.0 on 5.0

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
87901 Answers
6207 Consultations

5.0 on 5.0

If the selling rate is below circle rates then you have to pay stamp duty on the circle rates.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Further the difference amount shall be treated as your income and shall be taxed under income tax act under the head of income from other sources.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

Please get an independent title report of the plot so that you come to know if there is some fault in the property or not.

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

You will have to pay tax as per the circle rate and such transactions will be a legal transaction.

Regards

Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0

Firslty, though the circle rates are high in comparison to the amount on which it has been offered for sell, it doesn’t constitute any legal action in future.

Secondly, as every one has their way of doing bussiness, sometimes on profit or sometimes on loss.

Thirdly, the only condition which prevail in general public interest as the buyer must not have forced or influence the seller to sell at such low rate but not the actual rate.

Sanjay Baniwal
Advocate, South Delhi
5464 Answers
13 Consultations

5.0 on 5.0

You have to pay stamp duty as per guidance value even purchase less rate. Before going to purchase you will take legal opinion on the said purchase property it will avoid future litigations if any and it will save your hard earn money and your mental tension etc., All the best.

C. V. Jadhav
Advocate, Bangalore
545 Answers
18 Consultations

4.7 on 5.0

Dear Sir,

Such sales usually made if the builder is in hurry to raise funds. Some other times such sales may be suspicious. In either case you must be very careful and get all documents cross verified and take EC for last 30 years in respect of land on which it was constructed. You have to pay tax on the difference amount.

Kishan Dutt Kalaskar
Advocate, Bangalore
6050 Answers
381 Consultations

4.8 on 5.0

if its a genuine transaction and all payments are made by cheque, then the difference will not matter

Yusuf Rampurawala
Advocate, Mumbai
6878 Answers
79 Consultations

5.0 on 5.0

1. There is no Legal risk, IF the builder is selling less than the Govt. rateable value. The builder might be doing so probably because of his need for money or clearing out stock.

2. HOWEVER, the Purchaser shall have to pay Stamp Duty and Registration Fees on the full value of the Govt. rateable value and NOT on the lesser sale value.

Keep Smiling .... Hemant Agarwal

Hemant Agarwal
Advocate, Mumbai
5612 Answers
25 Consultations

5.0 on 5.0

The stamp duty has to be paid as per the the government guidelines value of the proeprty even though the market value will be lesser than the government fixed rate.

You have to ascertain that why the seller is selling the property to an under value and confirm the genuineness of the proeprty by referring the property related documents before a local advocate, have his opinion and then proceed if it is recommended to buy.

T Kalaiselvan
Advocate, Vellore
78059 Answers
1543 Consultations

5.0 on 5.0

Do i have to pay tax on the difference amount ( circle rate amount - selling rate ) , to make it a legal transaction or i there any way out other than that.

Yes, you have to the stamp duty as per the circle rate. There is no tax payable for the proeprty purchased by you.

T Kalaiselvan
Advocate, Vellore
78059 Answers
1543 Consultations

5.0 on 5.0

You are free to buy the land at any amount of consideration, but the stamp duty is to be paid as per Circle rate (guidance rate)for the purposes of registration of sale deed.

Siddharth Jain
Advocate, New Delhi
5928 Answers
101 Consultations

5.0 on 5.0

Do i have to pay tax on the difference amount ( circle rate amount - selling rate ) , to make it a legal transaction or i there any way out other than that.

A. The stamp duty would be levied on you as per

guidance value of the property of Rs. 5,735/- per sqft., not purchase price. That's the only way.

Siddharth Jain
Advocate, New Delhi
5928 Answers
101 Consultations

5.0 on 5.0

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