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- Hon’ble Finance Minister as a part of the stimulus package has announced amendment to section 43CA as well as section 56(2)(x) of The Income Tax Act, 1961. The said amendment has been mentioned as a game changer and has also been appreciated by the stakeholders. Impact of the said amendment is being briefly discussed hereinafter.
- The aforesaid sections primarily provide for taxability of difference in the hands of the developer of the property and the buyer in case the stated consideration for the property is less than the circle rate or the stamp duty value of the property. The proposed amendment increases the size of the window from 10% to 20% within which the transaction of the property can take place without having any additional tax implications in the hands of buyer as well as the seller. In other words the aforesaid sections for presumptive taxation of difference will not come into play in case the stamp duty value of the property is 20% more than the transaction value of the property.
- The benefit of this enhanced window of variation of 20% is available:
- For transactions which take place between the period 12/11/20 to 30/06/21
- Only for sale of a property held as stock in trade
- For sale of residential units upto Rs 2 cr
- In other words the proposed amendment has very limited application and prima facie seems to be ill conceived.
- There can be two reasons for transfer of a property taking place at a value less than its stamp duty value. One reason can be that the stamp duty value fixed for the property is too high and is more than the actual market value of the said property. The other reason can be that there is some unaccounted & undisclosed consideration between the buyer and seller of the property. It is not clear as to which of the aforesaid anomalies is being addressed by the amendment.
- In case it was felt that the stamp duty values of the property are unrealistic, then a better approach would have been, to take necessary corrective action in this regard and ensure that the states revise the circle rates to make them more realistic. This would have resulted in reducing the stamp duty burden also on the buyer of the property and would have corrected the anomaly itself. If that is not the case and the circle rates or the stamp duty values of the properties is still less than the real market values of the properties then in that case this window would increase the unaccounted transactions. In other words if the stamp duty rates are realistic and represent the actual values or are less than the actual market values of the properties then this window should give leverage for entering into the transaction with unaccounted and undeclared cash consideration.
- I am apprehensive wrt the contribution of the proposed amendment in making the country ‘Atamnirbhar’
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