Selling 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 Seller when transacting 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).
If a Seller sells a property at a price which is lower than the Guidance Value, the government considers the Guidance Value as the “Full Value of Consideration.” Consequently, Capital Gains tax is calculated as per the government rate, not the actual sale price.
Financial Impact: The Reinvestment Rule
Scenario: You sell a property (bought for 1 Cr, 15 years ago) for 5 Cr today. However, the Guidance Value is 9 Cr.
5.00 Crore
5.50 Crore
In order to save 100% of the tax, you must reinvest the amount calculated based on the 9 Cr valuation, not your actual 5 Cr receipt.
Legal Exceptions
Independent Evaluation: If an IT officer appoints an independent evaluator, the value prescribed by them will be considered the registered value for tax calculation instead of the standard Guidance Value.
Are you a Buyer? Click here to see Buyer Tax Liability
Palm Meadows Guidance Value: Click Here
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