The Bengal government has appointed consulting firm Deloitte to come up with a solution on how to bring parity between the transaction value of a property and the notified circle rate of the area where the property is located.
The state’s move appears to be in response to the repeated representations of the real estate industry and feedback from buyers that circle rates — which are decided by the office of inspector general of registration — are often found to be higher than the actual value of the property in many localities.
At least three meetings have taken place between the state government and the global consultancy, which is expected to submit its recommendation in the coming months.
Deals below Rs 1 crore is levied 6 per cent stamp duty in urban areas and 5 per cent in rural areas, while purchases above Rs 1 crore attract 7 per cent (urban) and 6 per cent (rural).
Since stamp duty and registration fee (1.1 per cent) are imposed on circle rate, tax outgo goes up if the rate is more than the transaction value of the property.
“IGR valuation is a global challenge. It is a complex issue. We have appointed Deloitte to look into the matter. The idea is to imbibe best practices from the globe,” Bengal finance and industry minister Amit Mitra, said.
He was responding to the suggestion of Nandu Belani, president of realtors’ body Credai in Bengal, during ‘Statecon 2019’, a seminar organised in Calcutta on Thursday. The anomalies are visible in many pockets of Calcutta as well as in other towns of Bengal such as Siliguri and Asansol.
While paying a higher stamp duty is one part of the issue, provisions of the Income Tax Act deal double whammy to buyer and seller alike.
While computing capital gains from sale of an immovable property, the circle rate is considered under Section 50C of the IT Act, irrespective at the rate the transaction is done, and tax is computed on the capital gain.
Likewise, if a buyer purchases a property below circle rate, then the
difference between the price at which property is purchased and the circle rate is considered as deemed income at the hand of the purchaser and taxed at the applicable rate as per 56(2)X of the IT Act.