And our hardship w.r.t. Delhi property Circle rate continues its surge, thanks to Delhi Government and to the Income Tax Act

Property transactions are undertaken for various purposes viz. investment, trading, distress etc. However, a transaction in property may lead to gain for some and loss for some but the Circle rates in Delhi in certain areas coupled with our Income Tax Act ensure that, in current market scenario, either these transactions do not take place or if at all they do then it results in a loss for all.

Taking the probable example of some of the well-known areas in Delhi like Defence Colony, Mohan Co-operative etc., the Circle rates last revised by the then Delhi Government haven’t been changed so far, in the past, property prices were prospering in these areas when the Circle rates were revised keeping in view the property prices in those times but as far as the current scenario is concerned, market prices are quite lower when compared to the Circle rates existing in these areas.

Thus, specifically in Category A let us say that Circle rate per square meter is 7 lakh whereas the market price is only around 5 lakh but the buyer and the seller have to make the Stamp duty and Tax payments as per 7 lakh. Let us take an example:

“A” sells a Property in Defence colony to “B”, being 200 square meters in area, @ of INR 5 lakh per square meter and let us say that the cost of acquisition of the aforementioned property for “A” was @ 2 lakh per square meter then following will be the scenario w.r.t. “A”:

Actual Sales consideration = 10 Crores (200X500000)

Cost of acquisition =                 4 Crores (200X200000)

Actual gain =                             6 Crores (10-4)

However, “A” shall be required to pay Capital gain Tax on 10 Crores as 10 Crores will be the amount of Capital gain because Income Tax Act prescribes computing Capital gain on the basis of valuation adopted by Stamp valuation authority and Stamp valuation authority adopts the value in accordance with the extant Circle rates or actual sales price, whichever is higher. Thus, in our case following will happen:

Sales consideration adopted by Stamp valuation authority = 14 Crores (200X700000) basis Circle rate

Cost of acquisition =  4 Crores (200X200000)

Capital gain, based on valuation adopted for Stamp duty =   10 Crores

Whereas the actual gain is only 6 Crores. This is what will happen with the seller.

Now, let us see that what will happen with the buyer:

  1. Buyer will have to pay Stamp duty on 14 Crores instead of 10 Crores which is the actual purchase price.
  2. In accordance with Section 56(2)(VII)(b) of the Income Tax Act, if an immovable property is received wherein the consideration shown is less than Stamp duty value by more than INR 50,000/- then Stamp duty value as exceeds the consideration shown shall be deemed to be Income from Other Sources for the buyer. Thus, if buyer shows the consideration for the Property purchased as 10 Crores then he/she shall be liable to pay Income Tax on 4 Crores which shall be deemed to be the Income from Other Sources for the buyer.

Hence, primarily due to the aforementioned reasons, either Property deals are not taking place in such areas and if at all they are then most of them are distress cases wherein the buyer and/or seller who is already in distress, has to further bear the brunt of lack of dynamism in revision of Circle rates in concurrence with the market conditions and due to our Income Tax act which leaves no recourse with the assessee.

Numerous such petitions have been turned down by the courts thereby leaving the effected in distress and agony.

Something has to be done fast and affectively. …

(Author Details- CA Sahil Jolly – Jolly & Co. Chartered Accountants, Contact: +91-9999830077, Email :

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7 responses to “High circle rates, low property prices and hardship continues…”

  1. Hitesh says:

    What is the scenario if one has purchased disputed property below circle rate.where mother deed is not there,sold by nephew without will ,just on basis of FIR and ad in newspaper.

  2. SANOJ SINGH says:


  3. Deepak says:

    This is the same case in case of Alipore Road of Kolkata. Whereas the actual rate of a 30 years property is Rs 6000/- square feet but the circle rate is Rs 11,000 sq ft( a huge difference of Rs 6000 per sq ft) I know a lady who is is distress to sell the property but cannot.
    The Govt is actually pushing people to poverty.

  4. kc hitesh says:

    through out india this is a big problem. Sellers have to pay tax on gain which is not earned by him.

  5. harish sharma says:

    Sir this is happening in various area of delhi, where circul rates are more than the market rate.

  6. Kumar Gaurab says:

    Its impossible to get a 200 sq. meteres of Land in Defence Colony for Rs. 10 Crores. So, The circle rates are correct and to discourage black money (untaxed money) parking. The actual market price of 200 sq. meteres of land in Defence Colony is between 16 Crores to 20 crores. so It is correctly valued and must continue.

  7. ashok kumar says:

    in india only is gunda raj , if govt required and fund, money , or income tthey have bharam ashtra , ( tax-tax tax or nothing ) and diveret the money ti scocial scheme .

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