Buying property below Guidance Value?
If you are thinking of buying or selling a property, you should first understand your tax liability. Below we have detailed the specific tax implications for the Buyer when purchasing at a price lower than the Guidance Value.
Income Tax Law Reference
Governing Sections: Section 52 and Section 52 (2)(10) of the Income Tax Law (Amendments from Budget 2013 and Budget 2018).
When a buyer purchases a property below the Guidance Value, the difference is classified as “Income from Other Sources.” This amount is added to the buyer’s annual income and taxed according to their respective tax slab.
Financial Impact: A 5 Cr Case Study
Scenario: You buy a property for 5 Cr that has a Guidance Value of 9 Cr.
4.00 Crore
1.60 Crore
Net Cost of Acquisition: 6.6 Crore
The Silver Lining
When you eventually sell this property, the Registered Value (Guidance Value) is considered your cost of acquisition. In our example, 9 Cr would be your acquisition cost, significantly reducing your future Capital Gains liability.
Are you a Seller? Click here to see Seller Tax Liability
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