It is that time of the year when budgetary wishes and requests are expressed. The best request for the salaried class would be the restoration of the standard deduction of Rs 2.5 lakh. This would give respite to the salaried class as it is not entitled to any deductions on expenditures such as interest on car loan, depreciation on car or spending incurred on salary earnings. This would fix the minimum taxable limit at Rs 5 lakh without disturbing the other categories of taxpayers. These taxpayers are entitled to expenditures incurred on earnings and need not be pampered. In any case, they tend to evade taxes through avenues that are not available to the salaried class.
The second wish would be the abolition of the draconian Section 45CA and Section 50C of the Income Tax Act. These sections stipulate that if one sells a house, property or land whose valuation for stamp duty purposes is higher than its actual selling price, the income tax department will consider the stamp duty valuation as the selling price and tax accordingly. State governments have increased the circle valuations for stamp duty purposes to ridiculous levels and this has resulted in stamp duty valuations that are much higher than the actual transaction cost. Considering such valuations as notional selling prices turns the entire taxation structure on its head; it leaves little with the seller.
In times of downturn, the real estate sector is providing employment to a large number of people. The sector also drives industries such as cement, steel and other hardware. Why such an industry should be subjected to draconian measures is beyond comprehension. It is often presumed that real estate entrepreneurs are crooks, who undervalue every transaction. It is the duty of the income tax authorities to detect tax evasion and enforce penalties. Instead of doing its job, the government has set its sights on low-hanging fruits in the form of stamp duty valuations as this helps tax assessees without having to do any hard work.
The earlier provision of the government of taking possession of the property at a higher price was more judicious. An alternative could be the income tax department making sale agreements mandatory for all transactions above Rs 1 crore. The department should have the option of posting advertisements in newspapers for the auction of properties it finds are undervalued. The property should be sold at a higher price if a higher bid is received. This way the government could earn higher taxes while the seller would get a higher sale price.
DP Ghatak Durgapur
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