 "Property value can be lowered through revised declaration under IDS")
Tax payers who have declared immovable property can now revise it under the Income Declaration Scheme ('IDS) even if the revised value is lower than the original declared value.The Central Board of Direct Taxes (CBDT) clarified this amendment last week in the latest round of Frequently Asked Questions (FAQs) on the Scheme issued.
The CBDT recently amended the rule for the valuation of immovable property under the IDS. According to the earlier rule, if you declared immovable property under the IDS, you were required to get the immovable property valued as on June 1, 2016. But now it has been amended and if you have the title deed of the property, you have the option to declare the value on the stamp value as per the deed after applying the Cost Inflation Index. In case the property was acquired before 1981, you can get the fair market value done as on April 1,1981 and adjust it with the cost inflation index for the 2016-17.
One impact of the recent amendment is that people need not to go a registered valuer to get valuation done, as the stamp duty value can be considered based on the title deed of the property, if available says Kuldip Kumar, Partner and Leader Personal Tax PwC.
The CBDT has also clarified that if you have already declared property under the IDS and wish to revise it at a reduced value as per the amended rules, it is possible now. Earlier revised declaration at a lower value was not allowed.
"The CBDT has not talked about refund. But if they are permitting a lower value while filing a revised declaration, then they may probably allow a refund," says Kumar.
Those declaring assets under the IDS have to pay 45 per cent of the asset’s value as tax plus penalty.
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As per the amended rules for IDS, the period of holding shall be taken from the date of acquisition for such property. Therefore, taxpayer shall be eligible to claim indexation benefit if the property is adjudged as long-term capital asset. For instance, if the property that is disclosed in IDS was purchased on July 1, 2014 and later on sold on July 15, 2017, under the earlier rules, the gain would be classified as short-term capital gain (STCG) at the time of sale. But, as per the amendment, now this shall be classified as long-term capital gain (LTCG).
Long term capital gain applies if the property is held for more than three years and tax is charged at 20 per cent with indexation. While short-term capital gains tax is taxed as per slab rate which could go up to 30 per cent. But for property declared under the IDS, indexation benefit is not available for the entire holding period, but only from June 1, 2016 onwards.
“But since the tax-payer is already taking into account cost inflation index, while declaring the property value, it is kind of getting indexation benefit,’’ Amit Maheshwari, partner, Ashok Maheshwary & Associates.
Another advantage of amending the date of property valuation is that tax-payers can get the benefit of further investment under Section 54 or 54 F, in case of long-term capital gains, he adds.
The last date for taking benefit under the IDS is September 30, 2016. Once the window comes to an end, you could be opening yourself for prosecution, which could be severe say experts.
