High Use of Black Money in Indian Real Estate: Finance Ministry

The NIPFP (National Institute of Public Finance & Policy) has asked the IG (Inspector Deneral) of Registration and Controller of Stamps to submit the details of the 3 highest value transactions that happened in the past two years in every area in Mumbai &  Pune. It has also sought the number of sale documents registered, registration & stamp duty paid as well as ready reckoner rates fixed in every area.

Estimation of Unaccounted Incomes in India..!
The information has been demanded for a study called 'Estimation of Unaccounted Incomes in India'. The research was commissioned last June (2011) by the CBDT (Central Board of Direct Taxes), which falls under the Union finance ministry.

The institute began the study which means to review recent property deals to check for the use of black money with Delhi and adjoining Gurgaon & Noida before turning it into an all India exercise.

Incidentally, the first study on unaccounted money was conducted by NIPEP in 1985 wherein the estimates which are not considered reliable varied from $ 46,200 crore to $ 1.4 trillion. (Trillion = one lakh)

The CBDT commissioned the new study to unearth the use of black money in property deals that largely goes undetected due to the difference in market prices and registry rates set by state governments.

According to Indian income tax officials, the high use of cash in secondary market transactions is an open secret.

Car Parking Space Sold..!
In searches conducted over the last 2 years on Mumbai builders, have come across property deals involving huge amounts of cash. Though banned by Supreme Court, parking space is sold for cash ranging between Rs. 2 lakh and Rs. 25 lakh per car. Income tax department estimate the cash component varies from 20 to 40% of the total flat cost.

It has become common place for buyers to under-report the transaction to save on registration cost. For sellers, especially those who do not intend to use the money to buy new property, it means a capital tax burden, which they want to evade.

Big Generator of Black Money
According to Indian Income tax officials, the real estate sector is a big generator of black money. This, despite the fact that registrars nationwide have to report all realty transactions valued at Rs. 30 lakh and more. The income tax department normally compares the info it has with the data given along with the tax returns using the PAN (Permanent Account Number) furnished by taxpayers while registering property.

Src: Times of India.

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