Stamp Duty and Deemed Capital Gain – a fraud on general public by the State and Central government!

A new section 50C was introdcued in Income Tax Act a few years ago. It was introduced to reduce black money property transactions. Although the intent was right, the implementation is horribly wrong! 👿

This new section completely changed the Capital Gains Tax (CGT) scenario. Earlier, CGT was calculated from the real (or apprently real) sale consideration. Now the same is calculated from the deemed sale consideration.

The deemed sale consideration is calculated as per the values given in the Ready Reckoner (RR) for a year. The RR is published every year by the state government and gives values of property for the purposes of stamp duty.

State governments whisically and in complete disregard to the market realities keeps increasing the supposed market values of the properties every year to augment their stamp duty collection. Central government has now joined this bandwagon and saw it as an opportunity to increase tax collection and play a fraud on general public!

Under the new regime, the tax is on deemed gains rather than the actual gains, which, in my humble opinion, is a complete violation of the basis of charge of Income Tax. Now the tax is levied on assumed income. Whether it is actually earned or not is completely immaterial. I wonder why this provision has not been challenged as anti-constitutional so far in any courts.

From my practical experience I can say that at times, the CGT (which is supposed to be only 20% of gain) is more than the actual consideration received! How can they expect people to bear this? Our Finance Minister has one track mind of increasing revenue. When will the governments start thinking about increasing public convenience?

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