Higher value of property transaction to be taxed

NEW DELHI: Property buyers beware, taxmen will now get at you if a property transaction is shown undervalued as they are now armed with a new provision in the Income Tax Act to impose a levy if the property is valued much higher than disclosed.

Section 50 C of the Income Tax Act empowers the tax authorities to impose tax as per "guidance value" of the property, which is generally more than the registered value disclosed by buyers, said a finance ministry official.

Guidance value is assessed by stamp valuation authority or registrar in states for various areas in cities and towns. Citing an example, the official said that if a return is filed mentioning that a property valuing Rs 20 lakh is bought by a tax assessee when the guidance value for the property is 40 lakh, then he would have to pay tax on the additional Rs 20 lakh as it would be treated as undisclosed income.

This is part of the efforts of the Income Tax authorities to check black money generation in property transactions, he said. The guidance value will vary from place to place, but the official felt, the guidance value was still lower than the actual value. However, this would help plugging black money generation partially, he said.

The guidance value in South Delhi is around Rs 45,000 per sq yard while the real value is much higher between RS 75,000 to Rs one lakh per sq yard. "Though guidance value is certainly more than the registered value, it does not come close to the real value of property transaction," he said.