Vidarbha Taxpayers Association writes to PM, FM against 'double tax' provision

NAGPUR: Vidarbha Taxpayers Association (VTA), a city-based voluntary organization that takes up issues related to taxation and other public problems, has submitted a memorandum to prime minister, finance minister and chairman of Central Board of Direct Taxes (CBDT), expressing its disagreement with a provision in Finance Act 2013. Section 43CA of the Act, along with an amendment to Section 53(2)(vii), leads to double taxation, which is against principles of fair taxation, said VTA.
The provision says, in case a person sells property at a rate lower than the ready reckoner, both the buyer and seller will be taxed. Ready reckoner rate is a value of a property arrived at by the town planning department or similar agency. This is the basic rate at which the stamp duty has to be paid regardless of the value of transaction.
Now, with the amendment in the Finance Act, if someone sells a property at Rs 1 crore and its ready reckoner value is Rs 1.50 crore, then the seller's capital gains would be calculated taking income to be Rs 1.50 crore. At the same time, the difference of Rs 50 lakh is added to the buyer's taxable income too. The government logic behind this is that it considers buying property at a rate below the ready reckoner a deemed profit.
VTA says this leads to double taxation. "Rather, the tax is collected on the income which has not been earned at all," said VTA secretary Tejindersingh Renu. VTA's memorandum said this was leading to several complications. Moreover, ready reckoner cannot be the right assessment each time. Many residential plots are purchased on loan, so even the banks will have to finance a portion of the tax on this deemed income, it said.