The Finance Bill, 2016, was passed in the Lok Sabha on 5 May and in the Rajya Sabha on 11 May. Once the bill becomes an Act, there are various amendments in it that will get implemented from 1 June 2016. However, there are some that will only get implemented by 1 April 2017. For instance, the amendment in section 50C of the Income-tax Act, 1961, which deals with computation of capital gains, will become effective next year. One of the amendments under the same section is regarding the stamp duty value of a property now being based on the date of agreement; currently it is calculated based on the date of transfer.
WHAT IS SECTION 50C?
Section 50C of the income-tax Act specifically deals with the gross value that should be considered for the computation of capital gains in case of transfer of land or building. It comes into force when there is a difference between the sale value stated by the seller and value of the property assessed by the stamp duty authority. So, if the value stated in the instrument of transfer is less than the valuation assessed or assessable by the stamp duty authorities, the latter valuation will be considered to compute capital gains.
For instance, if you sell a property for 70 lakh, but according to the authorities, the property is valued at 75 lakh, then the sale value of the property will be considered to be 75 lakh. Further to this, the capital gain arising from the sale will be computed on the basis of 75 lakh.
WHAT ARE THE CHANGES?
It has been proposed to amend the rules in cases where the date of agreement to sell and date of transfer (registration of property in the name of the new buyer) are different.
In such cases, the value assessed by the stamp duty authority on the date of agreement may be considered to compute the full value for the transfer of property.
For instance, if you enter into an agreement to sell a property in June 2017 but the actual transfer by way of registration take places only in December 2017, in such a case, the stamp duty authority will have to value the property as on June 2017, instead of December 2017.
TERMS AND CONDITIONS
The rules only apply when the amount of consideration, or a portion of it, has been received by the transferee or the seller of the property on or before the date of agreement. It is also necessary that the money should be received by way of an account payee cheque, account payee bank draft, or by an electronic clearing system (ECS) mandate. Payment in cash will not be considered.