Tax net for property transactions widened

Tax planning around gifting of immovable and movable properties will soon turn out to be a difficult task. The Government has widened the tax net for property transactions in this Budget, to curb “black money” transactions in the property market.

From 1st October 2009, the value of any property received without consideration or received with an inadequate consideration will be included in the computation of total income of the recipient. Such transactions would be taxable at the hands of the recipient under the head “income from other sources”.

The proposed change in law would cover immovable property (land, building), shares and securities, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art.

Currently, any amount in excess of Rs 50,000 received without consideration by an individual or a Hindu Undivided Family is chargeable to income-tax in the hands of the recipient under “income from other sources”. Anything received in kind was outside this provision till now.

In the case of an immovable property received without consideration and where the stamp duty value of such property exceeds Rs 50,000, the stamp duty value of such property is proposed to be taxable as income from other sources. Where the consideration is less than the stamp duty value, the stamp duty value reduced by the consideration received would be taxable as income from other sources.

However, the proposed change will not apply when the property is received from any relative or on occasion of marriage of the individual, or under a will or by way of inheritance or in contemplation of death of the payer or donor or from any local authority or certain registered trust.