Increase in safe harbour limit of 10% for home buyers and real estate developers selling such residential units under Union Budget 2021 to 20% for certain transfer during the period from 12th November, 2020 to 30th June, 2021
Section 43CA of the Act, inter alia, provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (i.e. ―stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall for the purpose of computing profits and gains from transfer of such assets, be deemed to be the full value of consideration. The said section also provide that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and ten per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration.
Clause (x) of sub-section (2) of section 56 of the Act, inter alia, provides that where any person receives, in any previous year, from any person or persons on or after 1st April, 2017, any immovable property, for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration shall be charged to tax under the head ―income from other sources”. It also provide that where the assessee receives any immovable property for a consideration and the stamp duty value of such property exceeds ten per cent of the consideration or fifty thousand rupees, whichever is higher, the stamp duty value of such property as exceeds such consideration shall be charged to tax under the head ―Income from other sources‖.
In order to boost the demand in the real-estate sector and to enable the real-estate developers to liquidate their unsold inventory at a lower rate to home buyers, it is proposed to increase the safe harbour threshold from existing 10% to 20% under section 43CA of the Act, if the following conditions are satisfied:-
The transfer of residential unit takes place during the period from 12th November, 2020 to 30th June, 2021
The transfer is by way of first time allotment of the residential unit to any person
The consideration received or accruing as a result of such transfer does not exceed two crore rupee
Further it is proposed to provide the consequential relief to buyers of these residential units by way of amendment in clause (x) of sub-section (2) of section 56 of the Act by increasing the safe harbour from 10% to 20%. Accordingly, for these transactions, circle rate shall be deemed as sale/purchase consideration only if the variation between the agreement value and the circle rate is more than 20%.
These amendments will take effect from 1st April, 2021 and will accordingly apply to the assessment year 2021-22 and subsequent assessment years.
[Clauses 10 and 21]
Text of the Relevant Clause of the Finance Bill 2021
Clause 10 of the Bill seeks to amend section 43CA of the Income-tax Act relating to special provision for full value of consideration for transfer of assets other than capital assets in certain cases.
The proviso to sub-section (1) of the said section provides that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and ten per cent. of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer.
It is proposed to insert a second proviso to said sub-section to provide that in case of transfer of an asset, being a residential unit, the provisions of the first proviso shall have the effect as if for the words “one hundred and ten per cent.”, the words “one hundred and twenty per cent.” had been substituted, subject to the conditions that––
(a) the transfer of such residential unit takes place during the period beginning from the 12th day of November, 2020 and ending on the 30th Day of June, 2021;
(b) such transfer is by way of first time allotment of the residential unit to any person; and
(c) the consideration received or accruing as a result of such transfer does not exceed two crore rupees.
It is further proposed to insert an Explanation to the said section to define the expression “residential unit” to mean an independent housing unit with separate facilities for living, cooking and sanitary requirement, distinctly separated from other residential units within the building, which is directly accessible from an outer door or through an interior door in a shared hallway and not by walking through the living space of another household.
These amendments will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.
Clause 21 of the Bill seeks to amend section 56 of the Income-tax Act relating to income from other sources.
Sub-clause (b) of clause (x) of sub-section (2) of the said section, inter alia, provides that where any person receives any immovable property in any previous year from any person or persons on or after the 1st day of April, 2017 for a consideration, and where the stamp duty value of such property exceeds ten per cent. of the consideration and the excess amount thereof is more than fifty thousand rupees, it shall be charged to tax under the head income from other sources.
It is proposed to insert a fourth proviso to the said clause so as to provide that in case of property being referred to in the second proviso to sub-section (1) of section 43CA, the provisions of sub-item (ii) of item (B) of the said clause shall have the effect as if for the words “ten per cent.”, the words “twenty per cent.” had been substituted.
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.
Clause (x) of sub-section (2) of the said section, inter alia, provides that the assets received without or inadequate consideration shall be charged to tax under the head “Income from other sources”.
It is proposed to amend the proviso to said clause of the said sub-section so as to exclude the transfer of capital asset between the original Fund and the resultant fund, which are not regarded as transfer under clause (viiac) or clause (viiad) of section 47, from the scope of clause (x) of the said sub-section.
This amendment will take effect from 1st April, 2022 and will, accordingly, apply in relation to the assessment year 2022-2023 and subsequent assessment years.
