Get ready to shell out money while selling immovable property (other than agriculture land) worth over Rs 50 lakh in an urban area or over Rs 20 lakh in any other area.
The Budget has proposed a 1 per cent tax on sale proceeds at the time of property transfer to check the use of unaccounted money in real estate transactions. Property transfer will not be registered without the proof of tax deduction.
If the sale value is less than that estimated by the state government, the tax will be calculated on the value assessed by the government.
This means property buyers will have to bear an additional cost as the seller may pass on the burden to them. “It is also an additional responsibility for buyers as they would have to complete the necessary procedures,” says Pranab Datta, managing director and vice-chairman of Knight Frank India.
Sachin Sandhir, managing director, RICS South Asia, says the proposal will deter speculative buyers.
There is no clarity yet on whether the tax will be deducted on a one-time basis, though the Finance Bill says “this would be ‘mostly’ a one-time transaction.”
In another significant move, the Budget has exempted the seller from paying capital gains (difference between purchase and sale price) tax on sale of a residential property if the proceeds are used to buy equity in a small manufacturing unit.
The government has extended for another year the scheme under which loans up to Rs 15 lakh for property costing up to Rs 25 lakh are offered at a 1 per cent lower rate. “By not rolling back the interest subsidy, the government has again signalled the need for state intervention in the affordable segment,” says Om Chaudhry, founder and CEO, FIRE Capital, and Chairman, Astrum Homes.
In another positive for Hindu Undivided Families, property received from any member of the family for no or inadequate amount will no longer be taxable. Earlier, such properties were included as income from other sources and taxed accordingly.
GOLD GETS EXPENSIVE
The import duty on gold-both standard (99.5 per cent and above purity) and non-standard-has been doubled. The customs duty on standard gold has been increased from 2 per cent to 4 per cent while that on non-standard gold has been raised from 5 per cent to 10 per cent.
The move is aimed at checking gold imports, which are blamed for India’s surging trade deficit. In 2011-12, India’s total gold import was close to $50 billion (Rs 2,50,00 crore).
“This will put an additional burden of approximately Rs 550 per 10 gm on standard refined gold bars calculated on the 16 March 2012 price of Rs 27,200 per 10 gm,” says Atul Shah, chief operating officer, Emkay Commotrade.
Also, any cash purchase of over Rs 2 lakh worth of gold jewellery will invite a 1 per cent tax on the purchase amount. This is aimed at checking the use of unaccounted money in gold transactions and discouraging cash payments.
Chirag Mehta, fund manager (commodities), Quantum Mutual Fund, says these measures are unlikely to make a significant impact on gold demand as the main reason for that is lack of banking and financial facilities in rural areas where major consumption happens.