The government in India realized very well that the black money transaction could possibly not be stopped. For this reason, the government is working towards the introduction of capital transaction tax in budget 2008. The capital transaction tax would be imposed depending on the “circle rate” prevailing in the state, where the deal is being registered.
A move to benefit the treasury/exchequer:
Introduction of capital transaction tax in budget 2008 is a means of retrieving revenues by the treasury at a time when the property market or the real estate industry is booming with opportunities galore. The rate of capital transaction tax, would be 1% of the transaction value that has been declared. The tax would be imposed either on the seller or the buyer. Currently the real estate market is very active and the price of landed or immovable property is at an all time high. It is also a well known fact that sellers or the buyers declare an amount much less than the actual value of the property.
The general trend followed in the country is that the sellers or the buyers lower the declared value of the transaction so that they are not required to pay more income tax or pay more a higher stamp duty. However, they do pay a percentage as brokerage cost, which is approximately 1% of the overall property deal. The percentage of brokerage differs from place to place depending on many factors, the circle rate being one of them.
For example:
The “circle rate” in Delhi can be categorized into eight circles. These circle rates have a grading from A to H. The circle rate range between Rs 6000 to Rs 43,060 per meter square.
It has been observed that the ratio of draft payment is approximately 60:40. The ratio of draft payment is referred to as “black and white” in the real estate terms.
The introduction of capital transaction tax in budget 2008 also has another reason for its execution. All these “black and white” dealings could be made transparent as far as possible.
In the event when the deals pertaining to landed property is funded by financial establishments, the chances of black money being generated is less. Any other source, for the funding of landed property is kept under scanners. To minimize such deals introduction of capital transaction tax in budget 2008 is suggested.
It is obligatory to report transactions of Rs 30 lacs and above to the tax officials in the country.
The declaration is obligatory as per Annual Information Return. This necessitates the declaration of financial transactions of high value as per Section 285BA of Income Tax Act of 1961.
Statistics reveal that in the financial year 2006-2007, total number of property deals was worth Rs 30 lacs. It increased by 40% in the country as compared to the previous years.