The homebuyers often look to purchase property at a budget-friendly cost as it allows them to avail increased tax benefit and the longest repayment tenure to repay the loan amount in easy and small installments.
Importance of Stamp Duty
Stamp duty is the amount paid to the concerned authority at the time of buying an immovable asset under its jurisdiction. This amount is the revenue collected by the Government that is used to develop infrastructure and better living conditions to raise the living standards. The stamp duty value increases the actual unit cost on paper and this makes a person owner of a worthy property.
Introduction of Law
Firstly, buying a property below the stamp duty value is not a good option as it brings down the unit cost on the papers. Secondly, the authorities also face financial crunch due to insufficient revenue and it acts as a barrier in development work. Hence, the Government introduced Section 56(2)(X) under the Income Tax Act 2017 that prohibits a person to evade from making a tax payment by buying a property at less than the stamp duty value.
If an immovable property is brought without consideration and the stamp value cost is figured out to be higher then the same is required to be declared in a person’s income tax return under the heading income from other sources. This amount will be taxed according to slab you come under.
The tax exemptions are available in certain conditions like if a person’s taxable income is more than Rs. 10 lakh in the fiscal year 2017-18 or the differential amount is taxed at 30 percent then you can avail exemption as below:
A Stamp duty value does not cross more than 105 percent of consideration and the difference between consideration and stamp duty value do not stand over Rs. 50,000.
Reasons for not Buying Property below Stamp Duty value:
1. Consistent Unit Values and Stamp Duty – The Union Government has introduced several reforms to make the Indian real estate working transparent and this is pushing black money out of the sector. The flow of black money in the property market has come down and it will come to standstill in some time. Hence, the properties are offered that a budget-friendly cost and thus the stamp duty value need not be a major concern.
The stamp duty values have come equal to the unit costs and hence there is no point in reducing the unit cost on paper as it will also reflect in long-term such as at the time of property resale.
2. Low-Cost Funding – There was a time when the property costs were touching the sky and the prospects were not interested to invest in the market. But, the formulation of the regulatory board like RERA, diminishing repo rate, innovative selling strategies, affordable housing and more has come to the rescue of both the Indian property market and the property buyers.
In short, the availability of pocket-friendly fund allocation system erases the necessity to purchase an immovable asset at a cost below the stamp duty value.
3. Small Down Payment – The down payment is a lump sum amount of money paid at the time of booking a unit and it allows a person to hold a property for a small period until the formalities are completed. In the present scenario, this amount does not exceed 20 percent and this is because the actual cost and the stamp duty value do not have a huge gap.
The buyers can easily purchase property with low rate of interest, small percentage of down payment and various attractive offers to avail. Hence, there is no need to bring down the value of your property by owning the same at less than the stamp duty value.