Finance Minister has increased the difference between circle rate and agreement value from 10% to 20%
Finance Minister Nirmala Sitharaman on Thursday announced another relief package to revive the economy. The lockdown was implemented when the Covid-19 epidemic spread in the country from March this year. This has severely ruined the economy. In an effort to get the economy out of this difficult phase, the government has announced relief packages in several installments in the last few months.
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The government’s focus in the recent relief package is on subsidizing registered employees under the Provident Fund scheme. Apart from providing credit to sectors in stress, accelerating manufacturing through Production Linked Incentives (PLI), reducing Ernest money in government tenders and providing subsidy to farmers on subsidies, the government has also given this relief package. Has taken steps.
Although the decisions taken to revive the economy appear to be in the right direction, but from the data point of view, it seems like a financial magic and lacks any new thinking to benefit the economy in a short time. gives. Whereas in the current situation, such new and bold ideas were needed.
In this relief package, an announcement has been made to increase demand in the realty sector. Under this, the so-called “Income Tax Relief” has been provided to buyers who are buying homes for the first time up to Rs 2 crore. This relief will also be provided to the developers. This is an important short-term change that will give both buyers and developers an exemption from tax. But, this relief is only till 30 June 2021.
Think of it like this – there are many types of unrealistic taxes in the income tax system. These taxes are levied on people for earning which they have not paid. Also, if a property purchase transaction is done at a price below the current circle rate, then the developer and buyer of the property are considered income under section 43CA and section 56 (2) (x). Based on this circle rate, the state governments levy stamp duty.
Further, no change has been proposed in section 50C of the Income Tax Act. This section applies to the property seller, in which the sale is recorded as capital gains. The market conditions are ignored in these sections and often these lead to legal disputes between the Income Tax Department and the tax payers.
After this amendment, there will be no tax on the property income of the property buyer on the difference between the circle rate and the purchase price. However, this will happen only if the difference is within the prescribed limit of 20 per cent.
For the last few years, the real estate sector has been in a slump and commercial real estate has been hit the worst after the Kovid-19 epidemic. In such a situation, keeping the properties of the commercial real estate sector and resale market away from this so-called advantage will reduce the attractiveness of this amendment and will also make it difficult to get the results that the government is expecting.
Instead of this change, it would have been more sensible for the government to advise the state governments to reduce the circle rate in areas where the property price has gone below the circle rate. At the same time, the government should have given additional tax benefit on the interest charged on the loan taken to buy both residential and commercial properties. The government should have cut the capital gains on the sale of the property. This would benefit both the buyer and the seller of the property. These steps could prove to be very helpful in reviving the real estate sector both in the short and long term.
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