In an exercise aimed at checking blackmoney, economic intelligence agencies have started identifying instances where proceeds from property sale have been suppressed in a bid to defraud the government of revenue from stamp duty.
The government may also form a database of the suppressed sales proceeds to help authorities decide on appropriate guidance price for land in an area, which is “closer to reality” and discourages blackmoney transactions, according to official documents.
The guidance value of land is the minimum price set by the state governments below which property cannot be registered.
The matter of sharing such details between Income Tax and Controller of Stamps departments was discussed during the meeting of Economic Intelligence Council (EIC) headed by the Finance Minister.
“It was reported that in large number of cases, the actual amount for which the property is purchased or sold is much more than the amount at which it is registered.
“A suggestion was mooted that instances of suppression of sale proceeds detected by Income Tax department could be used by Controller of Stamps department to build up a date base which would serve as supporting material for them to arrive at the prevalent price in an area. Thus the guidance value can be increased and brought closer to reality,” said the minutes of the meeting.
The field formations of Income Tax departments have been told to share relevant information in suitable cases in Regional Economic Intelligence Council (REIC) forum.
During the meeting, the Central Board of Direct Taxes (CBDT) has been told to have a relook at the issue by taking into consideration the provision enumerated in the Stamp Act also, as per the minutes.
“There is flow of blackmoney in suppression of property sales details and and also loss of revenue. Concerned authorities are devising ways to check them,” said a government official, who attended the meeting.
He said it is a usual practise to take large amount of blackmoney without mentioning it in sale deed. “It is illegal flow and efforts are on to check it,” the official said.
One reasons behind some people suppressing sale proceeds is high rate of stamp duty also, he said. Stamp duty is a kind of property tax to be paid in every deal at a prescribed rate on the transaction value or calculations based on circle rate, whichever is higher. The rate varies from state to state.
There has been a demand form real estate sector to reduce stamp duty to check flow of blackmoney.
“Land and real estate are possibly the most important class of assets used for investment of blackmoney. As immovable properties are not usually comparable, valuations are different. This imparts flexibility to the valuation process, and makes it an ideal investment for blackmoney.
“As an asset class both ‘black’ and ‘white’ savings are utilised for investment in land and real estate, which provides hedge against inflation apart from a profitable alternative for investment of black savings,” said a Finance Ministry report on blackmoney.