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Buying property in small city? Beware of the taxman!
Buying property valued considerably less than even Rs 30 lakh (Rs 3 million) in small cities may soon draw the attention of income-tax officials, if the transaction does not match payment of income tax.
These transactions may be categorised as high value that must be compulsorily reported to the income-tax department by registrars of property.
In line with ground realities, the income-tax department is planning to recast the system of high-value transactions reported by third parties so that it correlates with the tax payment of the assessee concerned to detect evasion.
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Buying property in small city? Beware of the taxman!
Currently, there is a uniform system to categorise what constitutes a high-value transaction, but the department is mulling a reclassification according to the size of cities.
Annual information returns (AIRs), which are high-value transactions reported by third parties to the department, might also include more categories against the present seven.
However, although this is under review by the department, no decision has been taken, a key official told Business Standard.
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Buying property in small city? Beware of the taxman!
"A review is going on to add more categories. Different kinds of transactions can be added to help prevent tax evasion. The idea is to make the external information database extensive by gradually expanding the scope of AIR," the official said.
Under the present system, if a person buys immovable property valued at Rs 30 lakh or above, a registrar or sub-registrar has to provide information to the
I-T department. It does not matter whether the property is purchased in Delhi or Kanpur. This information is then matched by the department with the tax payments of the assessee.
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Buying property in small city? Beware of the taxman!
But a Rs 30-lakh property value may not be as significant in Delhi, compared with smaller cities, where even Rs 20 lakh (Rs 2 million) may be a large amount. Therefore, the department is assessing if the floor on this value can be lowered for small and medium-sized cities.
At present, AIRs are furnished by banks, financial institutions, trustees of mutual funds, companies issuing bonds or debentures, companies issuing shares through a public or rights issue, registrars or sub-registrars of land or property and Reserve Bank of India.
It is furnished when the transaction involves cash deposits of at least Rs 10 lakh (Rs 1 million) in a year in a savings account, credit card payments of Rs 2 lakh (Rs 200,000) or more a year, purchase of mutual fund units of at least Rs 2 lakh, payment of a minimum of Rs 5 lakh (Rs 500,000) to buy bonds or debentures, share purchases of Rs 1 lakh (Rs 100,000) or more, purchase or sale of immovable property valued at Rs 30 lakh and above, and payment of Rs 5 lakh or more to buy bonds issued by RBI.
