Home Buyers’ Relief to Income Tax Everything You Need to Know

On 12th November 2020, the minister of finance (MoF) has declared the reduction in income tax applicable to the difference amount of the circle rate and agreement value of a property. The threshold limit on which the above-mentioned tax is imposed has been increased to 20% from 10%. The income tax rules state that if a property is transacted at the agreement price lower than the circle rate, then the difference amount is treated as the income of the buyer and this income is taxable.

Read Also: Godrej Buy 33 Acre of Land in Bannerghatta Road Bangalore

This decision has lessened the burden on the developers and buyers both. Also, this would help in buying and selling of houses much easier for buying a home would be much more affordable. Along with the other measures, this step is also taken to help the real estate sector boost up.

Read also: Top 10 Best Luxury Apartments in Gurgaon

Read Also: Buy Residential and Commercial Property in Noida

• What is Circle Rate?

The minimum price of a property set by the government depending on the location of the property and current market values of the area is called the circle rates. This is also known as Ready Reckoner Rate. While the valuation of a property, a comparison of the circle rate with the declared transaction value is made. The higher amount between the two values is taken for stamp duty calculations.

Read Also: ATS Homekraft Rohini Delhi

Read Also: Max Sector 128 Noida

Read Also: Godrej Woodsville

Read Also: Paras Floret 

• How does this Income Tax Relief works?

Under section 43CA, Income Tax Act, the difference between the circle rate and the agreement value is considered as the buyer’s income. And the buyer is liable to pay Income Tax on that amount. Now, earlier, the percentage of exemption from income tax was 5% on this amount. But in the last budget, it was stated in February 2020, that the exemption would be 10%. But now in November 2020, the exemption rate is revised and increased to 20% which is taxable according to the income tax slab.

This relief will benefit the developers and the home buyers who in this coronavirus pandemic driven lockdown had faced a steep decrease in the market values amid the financial slowdown along with the circle rates continuing to be very high. Though this relief is to be applied to the new properties only. Properties that have a maximum agreement value of rupees 2 crores and would be bought till 30th June 2021. This has to be noted that this relief is not applicable while reselling any property.

Read Also: DLF One Midtown

Read Also:- Top 10 Best Residential Projects in Gurgaon

Read Also:- Top 10 Best Residential Projects in Mumbai

Read Also: Loan Against Property In Noida

• Explanations with some illustration

Basically, the amount that is saved by the buyer due to this income tax waiver will impose less income tax payable.

Illustration 1: suppose Mrs. Dalal of Dahisarhas bought a registered 2BHK apartment of 1000 square feet, for an agreed value of rupees 1 crore on 15th November 2020. She was charged rupees 10,000 per square feet and let us assume that the prevailing circle rate of that time and area is rupees 11,000 per square feet. Therefore, the circle rate of her house is rupees 1.10 crore and the agreement value of her flat are rupees 1 crore that is lower than the circle rate.

Read Also: TVS Emerald Singasandra Bangalore

Read Also: Godrej Pimpri Chinchwad Pune

Now, since she has bought the apartment for a price lower than the circle rate, the difference between the amounts that are rupees 10 lacs is considered as her income as per the income tax rules, which is liable for income tax. This rupees 10 lacs is 9.09% of the circle rate. As per the income tax waiver, since the difference of percentages is less than the revised threshold of 20%, the buyer, Mrs. Dalal does not need to pay any income tax on that amount.

Read Also: M3M Sector 79 Gurgaon

Read Also: Smart World Sector 79 Gurgaon

Read Also: Birla Sector 150 Noida

Read Also: M3M Sector 128 Noida

Illustration 2: similarly, let us consider the case of Mr. Bhat from Greater Noida. He bought a 3 BHK apartment of 1500 square feet for an agreed value of rupees 45lacs, that is per square feet is rupees 3000 per square feet, on 15th November 2020. Let us consider that the circle rate prevailing at that time and area is rupees 4000 per square feet, that is rupees 60 lacs.

Read Also: Smart World Sector 111 Gurgaon

Read Also: L and T Sector 150 Noida

Read Also: M3M Sector 111 Gurgaon

Thus, the buyer buys at a price lower than the circle rate, and thereafter the difference amount of rupees 15lacs (25%) is liable for income tax. Now the threshold percentage is lower by 5%. Therefore Mr. Bhat has to pay an income tax of 5% that is rupees 3 lacs.

Read Also: - Top 10 Best Residential Projects in Pune

Read Also:- Top 10 Best Residential Projects in Kharadi

Read Also: - Top 10 Best Residential Projects In Undri 

Read Also: - Top 10 Best Residential Projects in Wagholi

Read Also: - Top 10 Best Residential Projects In Bangalore

Read Also: - Top 15 Best Residential Projects In Gurgaon

Read Also: Top 10 Best Residential Projects In Noida Extension

Read Also: - Top 10 Best Residential Projects In Sector-150 Noida

Read Also:- Top 10 Best Residential Projects in Noida

Read Also:- Top 10 Best Residential Projects in Wakad

Read Also:- Top 10 Best Residential Projects in Bavdhan

Read Also:- Top 10 Best Residential Projects in Nibm

Read Also:- Top 10 Best Residential Projects in Talegaon

Read Also:- Top 10 Best Low Rise Apartments in Gurgaon

Read Also:- Top 10 Best Residential Projects in Mamurdi

Read Also: Top 10 Best Luxury Villas in Noida

Read Also: Top 5 Best Luxury Projects in Delhi

Read Also: Top 10 Best Luxury Projects in Bangalore

Read Also: Top 10 Best Luxury Projects in Gurgaon

Read Also: Top 10 Best Residential Projects In Chennai

Read Also: Top 10 Best Residential Projects in Dwarka Expressway Gurgaon

Read Also: TARC Kirti Nagar Delhi

Read Also: Top 10 Best Luxury Apartments in Pune

Read Also: Top 10 Best Luxury Apartments in Mumbai

Read Also: M3M Projects in Gurgaon

Read Also : Assetz Group Property Bangalore Real Estate Developer And Builder