property-guideline-value

We will learn about property guideline value and its significance in this article.

Latest Updates

"Union Budget 2021 Outcome:

The time limit to re-open income tax assessment cases has been reduced to 3 years from 6 years. Also, in case of serious tax evasion, the assessment can be reopened until 10 years, only when concealment of income is more than 50 lakh."

What is Property Guideline Value?

A property guideline value is the estimated market value of the property based on government records. A property guideline value should, under ideal conditions, reflect its true market value. The property guideline value is usually lower than the market value of the property, but can be higher in exceptional cases.

All areas in the State are subject to the property guideline value set by the State government. Well-established properties have street-based guideline values. Residential areas without streets are valued based on the property's survey number.

Why is Property Guideline Value Important?

Purchasing a particular property and registering it are heavily influenced by the Property Guideline value. The registration officer can use this value to detect undervaluation of properties. In cases where the property guideline value is unnecessarily higher than the market value, such cases can be brought to the attention of the Deputy Inspector General of Registration, the Inspector General of Registrations, and the District Registrar for correction.

Stamp duty and registration charges for a property are typically based on the Property Guideline Value. A periodic revision is made to the Property Guideline Values to ensure they are in sync with the Market Value.

If a property's market value differs from its guideline value, what happens?

There can be two kinds of effects:

• The real estate industry encourages the transfer of black money 

When a property's guideline value is lower than its market value, there are many deals where only the guideline value is mentioned in the sale document and the balance is paid in cash. In general, a property's market value is higher than its guideline value, and the difference between the two often becomes the source of black money in the deal. and

• The second is a loss of revenue to the State government –

In addition, the Property Guideline Value is also used to calculate registration fees and stamp duties for a property. Property guideline values that are less than market values and the same is considered, will cause a loss of revenue to state governments.

A property purchased below the Stamp Duty Value may be subject to income tax

The seller and the buyer will both suffer losses because of Section 56 (2)(vii)(b) of the Income Tax Act, when a property is sold at a lower price than its stamp duty value. The section 56(2)(vii)(b) of the Income Tax Act provides that if the purchase consideration of a property exceeds the stamp duty value by more than Rs.50,000, the difference amount (between the Stamp Duty Value and the Purchase Consideration) will be treated as Income under the head “income from other sources”.

In any case, it is important to note that the above provision applies only in cases where the assessee receives the property as a Capital Asset and not as stock in trade.