Property market price is lower than circle rate

Property market price is lower than circle rate

i have purchased a land from development authority in year 2005  and registry was done   in sep 2007 . total amount spent on registry was Rs.660000.after purchasing the land i made baundry wall and small one room  with hand pump provision by spending Rs 75000.That property was purchased by taking home loan from bank.In the year 2010 i paid whole loan amount.Till  dec 2010 i paid 5.85 lakh to the bank . 
 I wanted a to buy a land in other city so i tried to sold it .since 2013 atleast 10 or 15 times I advertised in the Newspapers for selling that land . when I found that no buyer is ready to give the amount as per circle rate ultimately in  July  2016 i was forced to sell  the property just on half the circle rate.the actual selling price was Rs.1900000. what issues will arise related to capital gain and income tax and how should i deal with them.

Asked 8 years ago in Capital Gains Tax

Dear Sir,

Issue in selling the land below circle value is that income tax department may replace the actual sales value with the circle rate and that will result into higher capital gain taxes.

You should challenge the stamp value of the property at the time of paying stamp duty. Also keep copy of those advertisement with you.

Whatever documents you have to show that actual market value of the property is lower than SDV, that you should maintain.

Please feel free to call/ revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Abhishek Dugar

CA, Mumbai

3576 Answers

183 Consultations

Talk to Abhishek Dugar

Dear Sir,

If due to market condition you have sale the property less than the circle rate than also you need to pay income tax and stamp duty considering circle rate as sales value only.

However if there is big difference between circle rate and actual ales rate and the transaction is genuine than one can fight it out but chances of success are very less.

Vishrut Rajesh Shah

CA, Ahmedabad

950 Answers

39 Consultations

Talk to Vishrut Rajesh Shah

Sir as per Income tax Act in calculation of Capital Gains you need to take Circle rate or document value which ever is higher. For Ex. if circle rate is 10 lakhs and document value is 7 lakhs then the sale consideration need to be taken as 10 U/s. 50C.

Shyam Sunder Modani

CA, Hyderabad

1409 Answers

164 Consultations

Talk to Shyam Sunder Modani

in this case what will be capital gain?
land value with stamp duty=6.60 lakh,other expenses like boundary wall ,guard room,hand pump boring etc=75000 and payment against bank loan =5.85 lakh.
as per circle rate land value in 2016 july was 40 lakh
actual sale value is 19 lakh.

Asked 8 years ago

In order to buy a property in other city i was trying to sell the above  property .Since i failed to sell the property at that time with required amount i purchased the property by taking home loan. after  repeated advertisement from 2013-16  feeling that property is not going to give me desired amount even at circle rate in near future i sold the property just getting 19 lakh. my question is that can i repay my home loan from that 19 lakh.?  what other ways  to deal with the capital gain tax issue in this case ?

Asked 8 years ago

Dear Sir,

As discussed since you face genuine hardship and realise less money you can surely fight it out but just to mentioned that it will not be blanket benefit. You can surely opt for capital gain at actual rate and accordingly proceed for tax payments.

Vishrut Rajesh Shah

CA, Ahmedabad

950 Answers

39 Consultations

Talk to Vishrut Rajesh Shah

Sir if you want to oppose the circle rate an d go with the actual sale value then you need to refer the same to valuation officer. If the valuation officer gives less value then the same can be adopted. Since the gap is huge we suggest you to refer the valuation officer.

Also if after capital gains arrived by taking circle rate if you have invested the capital gains as arrived in purchase of new property then you can claim exemption. You need to put the amount of capital gains arrived in the new property. As per income tax act you can purchase the property before one year of the sale . So if you can give details in tabular form of sale , purchase and investment then we can guide you better

Shyam Sunder Modani

CA, Hyderabad

1409 Answers

164 Consultations

Talk to Shyam Sunder Modani

Hello Sir,

It appears that the rest of your query is resolved and hence I am answering only the latest one. Please feel free to get back if any of your query has been left unattended.

Yes, the sale proceeds can be used to prepay the housing loan but be sure that the banker does not charge you a Pre-payment charge.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP