Dear Sir We have taken one village property from my cousins (they are kids from my uncle who is real brother to my father) in 2018 for 16 lakhs, the actual circle value that time for this was approx 32 lakhs. The Cheque was given to 4 cousins each 4 lakh value in 2018 only and the cheque was realised same year and no agreement was done because of relatives. However the land is registered from my cousins to My mother in 2023, means they have registered the deed to their Aunt (real Chachi) for rs 16 lakhs and same is mentioned in registry. However we purchased stamps by paying full stamp duty as in year 2023. Land circle rate became 45 lakhs in 2023. So I have below questions- 1) Is there any income tax payable by us (buyer) for the difference value after deducting circle rate minus the actual buying rate in 2018 , the difference is around 16 lakhs. 2) My mother is govt employee and the cheques were paid from my account (her son), but property is registered on her name so anything else need to declare to govt or income tax authorities for this in her ITR? 3) In Income tax laws under section 56(2), We may not be needing to pay the income tax from this property if its acquired from relative, so under this section there is definition of relatives but we did not understand if we will qualify as relative. Land transferred by my cousin brothers (kids of my father's real brother) to my mother (their Chachi). 4) In our case, if my mother need to pay tax on this property on the difference of circle rate and purchase rate, then circle rate will be applicable as it was in 2018 (when we Paid cheques) or as per new rate in 2023 (property registered in 2023).
1) As the difference between the stamp duty value and the actual consideration paid is more than Rs.50k, difference of Rs.16 lacs would be chargeable to tax as income from other sources
2) If her total income exceeds Rs.50 lacs then she is required to disclose the property under Schedule AL
3) Gift is exempt between the relatives. In your case it is not a gift as consideration was paid
4) As per 2018
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Hello,
Income Tax Liability:
Reporting in ITR:
Relatives and Section 56(2):
Circle Rate Applicability:
Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.
Thank you.
Shubham Goyal
Hey
Income Tax on the Difference in Property Value:
In India, if the property was sold below the circle rate, the difference between the actual sale price and the circle rate exceeds 50,000 then it can be treated as income and taxed under Section 56(2)(x) of the Income Tax Act, which deals with "income from other sources."
In your case difference is 16,00,000 so it is taxable under head income from other sources.
Declaration and Filing ITR for Your Mother:
If the property is registered in your mother's name and she is the legal owner, she should declare it in her income tax return (ITR). Ensure that the property is correctly disclosed in her ITR, including the purchase price and the source of funds for the purchase. If her income exceeds 50 lakhs then she required to disclose property under schedule AL .
Definition of Relatives:
Under Section 56(2)(x) of the Income Tax Act, the term "relative" typically includes:
Spouse
Brother or sister
Brother or sister of the spouse
Any lineal ascendant or descendant of the individual
Any lineal ascendant or descendant of the spouse
Gift between relative is exempt from Income tax . But in your case property is not transferred as gift . Consideration is been paid .
Circle Rate Applicability:
The circle rate applicable for calculating income tax is typically the rate that was in effect at the time of the property transaction. In your case, since the property was acquired in 2018, the circle rate from that year should be applicable. The subsequent increase in the circle rate in 2023 is not relevant for determining the income tax liability.
Hope you find this answer useful . Please give your valuable feedback .
