Increase in safe harbour limit from 10% to 20 % for home buyers and real estate developers selling such residential units
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]
Amendment of section 43CA.
10. In section 43CA of the Income-tax Act,––
(a) in sub-section (1), after the proviso, the following proviso shall be inserted, namely:––
‘Provided further that in case of transfer of an asset, being a residential unit, the provisions of this 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, if the following conditions are satisfied, namely:––
(i) 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;
(ii) such transfer is by way of first time allotment of the residential unit to any person; and
(iii) the consideration received or accruing as a result of such transfer does not exceed two crore
rupees.’;
(b) after sub-section (4), the following Explanation shall be inserted, namely:––
‘Explanation.––For the purposes of this section, “residential unit” means 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.’.
21. In section 56 the Income-tax Act, in sub-section (2), in clause (x),––
(a) in sub-clause (b), in item (B), after the third proviso, the following proviso shall be inserted, namely:––
“Provided also 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) shall have effect as if for the words “ten per cent.”, the words
“twenty per cent.” had been substituted;”;
(b) in the proviso, in clause (IX) after the words, brackets and figures “clause (vii)”, the words, brackets, figures and
letters “or clause (viiac) or clause (viiad)” shall be inserted with effect from the 1st day of April, 2022.