Developers likely to move finance ministry against new property tax
New Delhi: Realty developers are likely to seek finance ministry’s help against the proposed property tax to be imposed on property sales. The realtors are worried that the additional tax would curb the growth of the real estate sector which is already facing slowdown.
By inserting Section 43CA in the Income Tax Act, the government has proposed a new tax on developers on the basis of assessed valuation of a property at the time of transfer, instead of levying it on sale price basis.
Market experts believe that with the recent rise in housing prices across India, the government seems to raise additional resources though this route. As per sources, the government is planning to revive the real estate sector that is linked to a number of industries like steel and cement and create jobs to thousands of construction workers. However, the developers said that the proposed tax is presumptive and questioned its constitutional validity.
This move of the government has annoyed both the sellers and buyers. Knowing this matter, some developers have even tried to convince buyers to register properties before the new tax is implemented.
By the proposed tax, a buyer may have to pay income tax even on the current value which he or she has not paid. It is expected that real estate transactions in the country will reduce if this new Section 43 CA is introduced.
The ministry announced that the new tax will be implemented from April 1, 2014. It had earlier said that the tax will apply in relation to the assessment year 2014-15.
According to the new section, where the consideration for the transfer of an asset (other than capital asset), being land or building or both, is less than the stamp duty value, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration for the purposes of computing income under the head profits and gains of business of profession.
As the government keeps rising stamp duty values every year (by 20-30 percent), the stamp duty values are higher than the actual sale values of land. Land value is influenced by various factors like connectivity, infrastructure, etc.
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