Circle tate more than pruchase price

abhimanyu (Querist) 18 March 2022 This query is : Resolved
One of my relatives proposes to purchase a residential property In Haryana on or before 31st March, 2022 the sale price of which is around 15% LESS THAN the CIRCLE RATE of that property . To put it differently, , the Sale Price of the residential property is appx. Rs. 20 lakh LESS THAN THE CIRCLE RATE OF THAT PROPERTY. KINDLY GUIDE TAKING INTO ACCOUNT EXISTING APPLICABLE LAW AND PROVISIONS OF INCOME TAX

1. WHETHER THERE WILL BE ANY ADDITIONAL LIABILITY OF INCOME TAX ON THE BUYER OF THE PROPERTY;

2. IF ANSWER TO THE ABOVE IS IN AFFIRMATIVE, HOW MUCH WILL BE THE LABILITY AND WHETHER THERE IS ANY WAY TO AVOID THAT LIABILITY

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This discussion addresses the tax implications of purchasing a residential property in Haryana for a price significantly lower than the official circle rate. The core questions revolve around whether the buyer will face additional income tax liability and, if so, how much and if it can be avoided. While stamp duty and registration fees are typically based on the higher of the sale price or circle rate, the potential for income tax on the difference is a key concern.

kavksatyanarayana (Expert) 18 March 2022
Regarding the Income Tax consult a local CA. You have to pay stamp duty and registration fee on the consideration or circle rate whichever is higher.

abhimanyu (Querist) 18 March 2022
kavksatyanarayana ji,
Is this the way to resolve query? Please do not spoil the query by suggesting to consult a local CA.

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abhimanyu (Querist) 18 March 2022
EXPERTS MAY PLEASE GUIDE

One of my relatives proposes to purchase a residential property In Haryana on or before 31st March, 2022 the sale price of which is around 15% LESS THAN the CIRCLE RATE of that property . To put it differently, , the Sale Price of the residential property is appx. Rs. 20 lakh LESS THAN THE CIRCLE RATE OF THAT PROPERTY. KINDLY GUIDE TAKING INTO ACCOUNT EXISTING APPLICABLE LAW AND PROVISIONS OF INCOME TAX 1. WHETHER THERE WILL BE ANY ADDITIONAL LIABILITY OF INCOME TAX ON THE BUYER OF THE PROPERTY; 2. IF ANSWER TO THE ABOVE IS IN AFFIRMATIVE, HOW MUCH WILL BE THE LABILITY AND WHETHER THERE IS ANY WAY TO AVOID THAT LIABILIY

P. Venu (Expert) 16 April 2022
To my knowledge, circle rates are not absolute. It is only a safeguard against under valuation. It has been held that "An instrument according to the definition given in Section 2(11) of the Stamp Act is said to be "duly stamped" if it bears adhesive or impressed stamp of not less than the proper amount chargeable under the Act. The amount of stamp duty chargeable upon various kinds of instruments is to be according to either Schedule l or I-A of the Act. According to these Schedules, deed of conveyance are required to be ' stamped on a slab according to "the amount of the consideration for which conveyance is set forth therein". It follows, therefore, that even where the market value' is higher than the amount of consideration that is mentioned by an executant in the conveyance deed, the stamp duty that will make it “duly stamped" will be the duty leviable on the amount that is set forth in the document itself. So long as the stamp duty is not less than this amount, the document must be held to be "duly stamped" and its registration cannot be refused under Section 35 of the Act. It can- . not be impounded nor it can be revalued on the basis of market value for enhanced duty under Section 40 of the Act. The only Safeguard available under this Act against under-valuation is the provision for prosecution of the executants under Section 64 provided the under-valuation is done with an intent to defraud the Government. The proper course to adopt for the Sub-Registrar is to register the document and then to refer the matter for prosecution of the executants under Section 64 of the Stamp Act"

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