• Buying an auction property under sarfesai act

If i am buying any property in auction which is held under sarfesai act from public sector bank and its govt valuation is much more than auction price ,then do i need to pay income tax on difference amount of auction price and govt valuation.
Please give the answer along with act or judgement.
Asked 5 years ago in Income Tax

Dear Sir,

 

No, you do not need to pay income tax on difference amount of auction price and govt valuation.

 

However, Properties under Bank Auctions are sold on “As is Where is & What is There is Basis” which implies Bank does not take any responsibility regarding Title of the property i.e. on encumbrance front, No liability of Bank. In the event of any legal dispute or any other claim on property, Bank does not indemnify the buyer from same. The complete responsibility of encumbrance rests with Buyer for auctioned properties.

 

It is always advisable to take help of Local Competent Professional Property Lawyer before participating in Bank Auctions as he can help you in understanding the rules and regulations. He can also help you to check Property Title and encumbrance on property (If any).

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

Under SRFAESI  ACT the auction is made by authorised officer and subsequent to sale a sale certificate is executed.

 

Since the property is purchased in auction done by a public authority hence Income Tax may not consider the value of the property at higher but at the same time IT deptt while calculating the capital gain on the property will also take the value on which it was acquired. 


 

Thanks & Regards,

Payal Chhajed 

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi,

- You need to get the property registered on govt. valuation i.e. payment of stamp duty will be on govt. valuation. You are purchasing property so no question of income tax arises.

 

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

Hi

 

Since you are buying property,you have to pay stamp duty.Capital gain tax arises in case of sale.

Stamp duty will be payable on govt valuation amount.

 

Hope it helps

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

First of all do check proper ownership of the property in such cases.

The property will be registered and stamp duty and since you are saying auction price is less than stamp duty value therefore you will have to declare difference amount as your income from other sources u/s 56(2)(vii) and pay income tax on same or else you can fight for same with income tax department since public sector is providing you such property.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement

 

Thank you

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

Hi

 

You need to pay stamp duty at the government value only.

However, since the auction is made under the SARFAESI Act, there would be no income tax implications in view of section 56 (2) of the Income Tax Act.

Lakshita Bhandari
CA, Mumbai
5687 Answers
909 Consultations

5.0 on 5.0

As per Section 50c of Income tax , Sale value which will be considered for capital Gain is higher of-

1.) Sale value.

2) Stamp Duty valuation.

 

 

Chirag Maru
CA, Raipur
210 Answers

5.0 on 5.0

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