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Capital Gains Tax And Suggestions To Improve Transparency In Sale And Purchase of Immovable Property -Real Estate

The Income tax department has introduced Annual Information Statement (AIS) from AY 2021-22. AIS captures around 46 financial transactions relating to the previous year at one place which includes purchase and sale of immovable property.

Sale of immovable property results in the huge tax liability at one go due to the high value transactions. This induces more tax avoidance behaviour. Long Term Capital gains tax is 20% with indexation benefit.

Listed below are the suggestions to improve transparency in sale and purchase of immovable property:

1. Reduce the tax rate on long term capital gains on sale of immovable property from 20% to 5 % or give exemption of Long term capital gains upto 5 lakhs and tax at 10%.

Reason:

  • The individual faces huge tax liability (at one go) on sale of immovable property
  • Reduction in tax evasion

2. The gap between the market value and Government value to be reduced by increasing the government value wherever necessary.

3. Reduction in the Stamp duty across all states.

Reason:

  • (2) and (3) will result in lesser burden on the buyer with respect to the stamp duty and other registration charges and showing the correct transaction value in the sale deed
  • Reduction in tax evasion

Ensuring errorless transfer of information from Registrars to Income Tax Department which reflects in AIS of the assesse.

Conclusion: If the Government gives a thought in this direction, it will reduce the taxpayer’s burden, reduce tax evasion, improves tax collections  and improve the transparency in real estate transactions

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