Sale price of property may no longer decide tax amount

The Central Board of Direct Taxes (CBDT) has come up with several new strategies to monitor the growing real estate activities in the country.

One of the provisions under consideration is assessing the full value of transfer of an immovable property taken for registration and not the sale price for calculating tax.

A tax official explained that this could be done by extending the provision of section 50C of the Income Tax Act for assessing the business transactions of immovable properties as is done for computing capital gains taxes.

Section 50C specifies calculating the full value of the transaction and not the sale price.

Similarly, all immovable property transactions registered with various authorities and exceeding Rs 20 lakh will be investigated by the department. Official sources explained that the purpose of the investigation will be to unearth the true value of the property.

This could be done by asking the seller and purchaser of the property to enter into an agreement, a copy of which will be filed with the department which could then call for bids for sale of the property through media advertisements at a price at least 25 per cent above the agreed sale price.

If such offers are received, the department would have the power to order the transfer of such property directly to the highest bidder. Since farm land is being acquired by corporates given the boom in the retail sector, interest income on land compensation would be made taxable in the year of receipts instead of allowing it to be spread over several years.

Sources explained that this needs to be done since assessment of some years in which the interest is spread across may become time barring.

Similarly, there is also a proposal to compel salaried persons possessing agricultural land to file total statements of assets and liabilities. This could be also extended to individuals who file accounts related to their business whereas they make huge transactions in their personal capacity, like gifts and loans and construction of properties.

It has been also suggested to amend the Banking Regulation Act so that withdrawals are shown in two different columns "" cash withdrawals or payments through clearing "" so that high value expenditure over and above Rs 20,000 could be traced for taxation.