Guide Lines Value are the estimated minimum value fixed by the Government for a property In
a specified area for purposes of registration of sale deed on which stamp duty
and registration charges are payable. These are the values fixed by the Department of Registration & Stamps for purposes of registration of
documents. It is needless to say that the guidelines value would vary from one
area to another. This is also different from the prevailing market value of the
property.
If the purchase value of a property is more than the guide lines value, the stamp duty and
registration charges are to be paid on the purchase value. The guidelines value
would change as and when the value of properties would go up or down at the
discretion of the Government. The present guidelines value in Karnataka has
been force with effect from 19- April, 2007.
Vicious circle
When the
Government increases the guide lines value, the price of properties begins to
soar, when the market value increases, the government enhances the guide lines
value and thereby the guide line value and the market value are trying to catch
each other in the race.
For many owning
a house has become a day dream in view of high cost of land and buildings and
with the reduction of their purchasing power due to under- employment and
unemployment. At the same time, the property developers are finding it
difficult to get buyers for their properties despite their voluntary reduction
in the value of properties due to market crash on account of global recession.
The rise and fall of rates are natural phenomena in any business and the
Government should allow sector to have its natural course of settlement.
Government has a
social obligation to cater to the housing needs of the public. Such affordable houses
need not be small hutment, but should at least have minimum requirements like
bedroom, kitchen, toilet, hall etc, with sufficient ventilation. By frequent
abnormal increase in Guide lines value, the poor and the middle class people
are finding it difficult to purchase the houses. Real estate investment is
becoming the exclusive domain of rich and influential. The government has a
duty to not to fuel the price rise. The Government itself is subverting its
social obligations.
Stamp duty and
Registration Charges Stamp duty and registration charges are very high in
Karnataka. As and when the guidelines value increases, payment of stamp duty and registration charges also increases and thereby there is an additional burden on the purchaser of a property. Apart from these charges, the purchaser
has to pay sales tax, service tax and charges for transfer of Khatha, power and
water connection deposits, etc., and whereas the seller has to pay capital
gains tax' in respect of the gain he made in the sale transaction.
Due to the
increase in stamp duty and registration charges. naturally, the parties to a
sale transaction prefer to disclose the deflated value of the property in the
conveyance deed and avoid payment of higher stamp duty and registration
charges. This, in turn, has lead to accumulation and circulation of black money
in the country. Some people may even opt for holding the property by way of
General Power of Attorney and by executing an affidavit declaring delivery of possession
of the property to the purchaser. Through this method, the people avoid
execution and registration of sale document which in turn leads to reduction
in the collection of revenue to the State exchequer. State Government should
adopt the well established principle that lower the stamp duty and registration
charges higher the revenue collection for the State exchequer.
With the
increase in the rate of the Guide lines value of a property in a particular
locality, the property owner's liability of municipal tax also goes up and
thereby an addi- tional burden is cast on the citizen. Home loans Banks and Financial institutions were very liberal in extending home loans till recently.
Providing housing loan to people was considered as a national cause in fulfillment
of the obligation of providing shelter to a large number of people. However,
the quantum of housing loan granted to the borrowers would depend upon their
repaying capacity. As the price of the properties increase on account of revised guideline values, the borrowers of housing loan may require higher
amounts to purchase the properties and their regular income do not match with
the requirement of the bank and thereby the borrowers have to curtail their
actual housing requirement and may have to be content with a small or
substandard property.
The tax on
profit earned on transfer of an immovable property has to be paid by the
seller. It may be kept in mind that if the value of the property disclosed in
the sale deed is lesser than the guide lines value, capital gains tax is
payable on the basis of guide lines value. In some cases, the market value of
the property is less than guide lines value and the seller may incur loss. Even
in such cases, the guide lines value will be taken as the basis for calculating
the capital gains tax and the seller has to pay the tax accordingly. In cases where the declared value of a property in the sale deed is more than the guidelines value, the declared value shall be taken as the basis for calculating the capital gains tax.
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