Market Value vs Govt Value Registration of property

Status
Not open for further replies.
Lord Nemesis

Lord Nemesis

Overlord
Luminary
So my builder is offering both options for registration of my flat and AFAIK both are perfectly legitimate.

Most of the others are going for registration on govt value since it saves about 2 Lac in cost compared to full value. (i.e 2.5 Lac instead of 4.5 Lac)

I am planning to go for registration on full value. I know that if I do market value registration, the full market price that I paid will be acknowledged in the documents and if I ever need to sell the property, capital gains for tax consideration would be based on difference from full value and so I have to pay less tax.

Apart from that, are there any downsides to Market value registration that I may be missing?
 
It is generally difficult to find a buyer who is willing to pay the full market price through cheque precisely for the reason you pointed out so you might face issues during re-sale unless the govt decides to re-work the circle rates before you decide to sell. If saving on Capital Gains tax is the only reason for considering paying full market price there are many other ways to offset the said tax.
 
I would under no circumstance be selling to anyone who wants to pay for it in cash anyway.

I am not sure if everyone is aware of this yet, but its been made illegal since 1st Jun 2015 to do cash transactions of over 20,000 Rs for property and the penalty is very harsh at 100% of the cash transaction value. For instance if you accept 20 Lac in cash for a property, you are liable to pay 20 Lac in penalty when caught.

Buyers who want to pay in cash will not have a lot of sellers in future. Only hardcore black money hoarders will be their only options for buying property.
 
  • Like
Reactions: ssslayer
^^ Its possible, However, my understanding is that under such circumstances, if the difference between registered/market value and purchase price is more than 50K, its treated as income to the buyer and subjected to tax as Income from other sources. This amendment came into effect 2 years back. So, if the actual price is 50 Lac and the buyer got it for 40 Lac, he would have to pay income tax on 10 Lac as its effectively treated as profit for the buyer.
 
Please also bear in mind that if you decide to get it regsitered for less than the previous registry price the registrar himself may object to the sale.

@Lord Nemesis if one is selling the property for a higher value but getting it registered for a lower value that in itself is illegal as you are making a false declaration in the registry and defrauding the government of stamp duty. This crime actually attracts jail time as well as a fine if caught. Still over 90% of property transactions in the entire country have an element of cash involved in it. Thats why the government hikes circle rates from time to time to bring parity between its rates and the market rates. And I dont see this practise vanishing anytime soon.[DOUBLEPOST=1459786156][/DOUBLEPOST]Also its always a combinations of cheque and cash as you have to show at least the official amount as payment to the seller. Rest of the difference is ram naam as agreed between the buyer and the seller.[DOUBLEPOST=1459786335][/DOUBLEPOST]This entire exercise exists only to avoid payment of stamp duty other than the bare minimum.
 
Last edited:
I am writing right after reading the first post.

Majority of us sell our property to buy another one, I think after selling one if you buy another one within an year you won`t need to pay capital gains tax.

On the other hand, sellers don`t mention their buying price, they seek the current market rate price so does n`t matter if you but the property at Govt rate or market value. Saving 2 lacs at this stage seems helpful to me.
 
If you have black money, this is where you use it. Its not just what you save in this transaction (2lac), its also what you saved on the previous off the books transaction say the amount being paid in cash is 20 lac and assuming you got it for a service, you saved 15% service tax and 30% incometax on the amount arrived at post deducting ST.
In total thats a significant saving. If you compare, this is money already saved right now, and black money disposed off.

About future benefits, that's indexation. When you index the current savings too, you'll still have a significant profit. Apart from that when you sell this property (assuming laws remain same), and put that money in another property, within a year, you will save that Capital gain tax too.

What happens when you sell 10-20 yrs down the line is not even a object of consideration. But just wanted to give you an idea on the line of thinking that leads to that decision. Govt isnt going to prosecute anyone for cash. If they do half the politicians will be in Jail. If i tell you the names of politicians that I know for a fact that indulge in this, you'll have a fair idea what the law is for - To harass builders, citizens etc and have another leg on them. Its easier to be corrupt when the rest of the population has no option but to do the same cause laws and taxes are so insanely formulated.

~~~~~ Purely theoretical discussion, dont follow any of it. Do think of the nation and the govt and how your taxes help Modiji tour the world. Dont be an anti-national ~~~~
 
I got my registration done at the "circle rate" applicable per sqft. Not sure if that is market value or real value.
 
This is the regarding the same subject. One of my friend is willing to sell of his apt and they are all kinda new to this.
One of the potential buyer asks for 45 day period. I understand it is for verifying documents, Going for bank loan etc. I want to know the process of Apt sale and this 45 day period in details.

Thanks.
 
Not too sure about other cities but this is a common practice in Hyderabad. I've never heard of any complications arising from it so far.
 
Status
Not open for further replies.
Top Bottom