LTCG on Property with Circle Rate doubled in a year!

Hello Team,

I bought a plot in 2022 with circle rate of Rs.14000. My plot registry is of value 40 lacs(white) + cash (black). Next year (2023) govt increased the circle rates to Rs.28000. Now, my property sale deed value will be 80 lacs. So, if I want to sell my plot now in 2024 after 24 months, how will I be taxed LTCG? If I sell plot at Rs.28000 circle rate it shows my capital gain as 100%. Can I sell plot for less than circle rate price? Please advise. Thanks!

No wonder govt decided to double the circle rate. This was done specifically to cover this scenario of people buying in black

Yes, on paper you have a gain of 100% and you will have to pay tax on it.
You can sell at less than circle rate, but you will still be liable to pay tax based on circle rate.

You bought the plot in 2022. Now if you wish to sell, the cost inflation index for 2024-2025 is 363. The same was 331 for 2022-2023. This means your cost will be 40,00,000 x 363 / 331 = 43,86,706.

If you sell it for 80 lacks. Your Capital gain will be 80L minus 43,86,706 = 36,13,294.

You can buy under 54EC Bond upto a max of 50L and not pay any tax.

The buyer will not be able to register the property at lesser rate than the circle rate. The very intention of Government increasing the rate is because they are aware that the area has good demand. Also no buyer will register the property at lower than the circle rate as when he sells his cost will be deemed as what was given in the title deed when registering the property. So any lower value will impact his Capital gain when he sells in future.

Even if you sell it lower than the circle rate claiming desperation and emergency situation, the buyer may have to pay stamp duty for the sale at circle rate. (not sure if this works)

Query: In my place the circle rate for property is low than the market price of the property. No one sells at circle rate. It will be much more. What people do is register the property on circle rate and then take the balance in cash. (black money). I also heard that in north India, circle rate and market price is generally more or less even. Because of lack of cash or black money the real estate market is dull in my part of the country.

Disclaimer - These are my personal views. I am not an expert but know a little bit of this as I sold a property few years back. I could be totally wrong on this.

https://cleartax.in/s/cost-inflation-index

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Can you give more details on this. Not sure which clebrity does this and gets away as they are always on the radar.

Hi @gabbar,

Yes, you’ll have to pay tax on your capital gain. As the holding period is more than 24 months, the gains will be long-term and will be taxed at 12.5%.

There is no “may”. it is mandatory.

It is all fine and legal as long as they comply with the restrictions placed by the tax-exemption they may have claimed under Section 54 or Section 54-F of the Income Tax Act as may have been applicable in their case. It is only recently (2024) that an upper-limit of 10 Cr has been placed on these exemptions.