Income Tax Relief- Regularization of unauthorized colonies in Delhi

Post Union cabinet approved regularization of 1728 unauthorized colonies in National Capital Territory of Delhi with levy of 0.5% stamp duty (against Stamp duty and transfer duty @ 4% if the vendee is a woman and @ 6% if the vendee is a man), notification 96/2019 dated 11.11.19 provided relief under Income Tax.

To curb cash dealings in transfer/ sale of immovable properties, income tax act (section 56 (2)(x)) provides that whereon such transfer, any person receives from any person on or after 1.4.17, immovable property either without consideration or for consideration below the stamp duty value then stamp duty value or difference of stamp duty value to 105% of consideration, stand liable for income tax. (Except if such value up to Rs 50000)

Notification 96/2019 dated 11.11.19 has provided an exemption from above tax liability where any immovable property, being land or building or both, received by a resident of an unauthorised colony in the NCT of Delhi, where the Central Government by notification in the Official Gazettee, regularised the transactions of such immovable property

This regularization be based on the latest Power of Attorney, Agreement to Sale, Will, possession letter and other documents including documents evidencing payment of consideration for conferring or recognizing the right of ownership or transfer or mortgage in regard to such immovable property in favor of such resident

Further, once the property transferred get covered for tax u/s 56(2)(x) then value considered for taxation u/s 56(2)(x) becomes the cost of acquisition u/s 49(4) for any further transfer

Accordingly if say value reflected under Power of Attorney, Agreement to Sale, Will, possession letter etc. is say Rs 100 whereas stamp duty value is Rs 1000, the on regularization Rs 895, which otherwise was liable for tax stand exempt and w.r.t. further future sale Rs 1000 will be considered as cost of acquisition

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{Disclaimer: This document had been written to provide Income Tax provisions in a simple manner. The author shall not be responsible for any of the decision made based on the contents of this document}