With the growing pressure to tackle the black money issue, India’s income tax officials have aimed their guns at the country’s biggest source of black money – property.
Under scanner will be the real estate deals likely undertaken in the 2010-11 year. Indian tax officials will begin reviewing properties bought and sold in New Delhi and the National Capital Region (NCR – which includes Noida and Gurgaon), extending the review to other cities later.
The income tax watchdog will be looking for cash deals in the last 12 months.
The crackdown will be carried out by India’s Central Board of Direct Taxes (CBDT) which hopes to catch property deals in black money which are not detected by the taxation system.
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It is a common corrupt practice in India to under-report a real estate deal – show a lower purchase price so that both the buyer and seller benefits – the buyer has to pay lower stamp duty and the seller saves on the capital gains tax.
This practice is common in the secondary property market – where occupied properties are bought from the existing owners.
The difference between the purchase price and the officially recorded price is paid in cash – often using black money.
However, tax officials say that transactions are under-reported even where a house is bought from builders directly.
The corrupt practice has maintained a stronghold despite a rule that requires the registrars to report all property deals exceeding Rs 30 lakh.
India’s IT department compares the data of these transactions with the records of PAN (permanent account numbers) to identify any irregularities, an IT official told The Global Indian magazine.
The IT official revealed that it is difficult to assess property deals of less than Rs 30 laksh.
Under pressure from the Supreme Court on dealing with black money, especially wealth stashed away in tax havens, the government is keen to show that it is doing its bit to address the concerns.