Simplified Laws Guide to Taxation and Legal Concern The Karnataka Budget Proposal to scientifically determine the guidance value using GIS (Geographic Information System) could be a major relief for many property owners.
After the guidance value revision in October 2023, thousands of properties have been overvalued compared to actual market rates, making it difficult for both buyers and sellers to close transactions.
As you may be aware, when the difference between the guidance value and the actual sale price exceeds 110%, the notional income provisions under the Income Tax Act come into play:
– Section 56 (for buyers) – Tax on the difference as “income from other sources”
– Section 50C (for sellers) – Capital gains tax based on the higher guidance value
It’s a double-edged sword for property transactions!
We have sought resolutions through the District Registrar, citing genuine cases where the actual market value was much lower than the guidance value. While we did receive relief in some cases, the registrar’s authority to reduce the rates is capped at 15%, limiting its effectiveness.
Perhaps there is hope in sight with this budget proposal. If the government can implement a scientific, data-driven approach to setting guidance values, it would bring much-needed fairness and transparency to property transactions.
Another proposal which may interest you!
The Karnataka Budget has proposed an increase in Professional Tax from ₹200 to ₹300 for the month of February every year, starting from February 2026.
The annual professional tax payable per employee will rise from ₹2,400 to ₹2,500.
Why not ₹300 per month? There’s a constitutional cap!
The Catch:
As per Article 276(2) of the Constitution of India, the maximum professional tax a state government can collect is ₹2,500 per year.
Did you know?
Originally, the cap was ₹250 per year, which was increased to ₹2,500 in 1988. Since then, state governments can collect up to ₹2,500 per year—and Karnataka, which currently collects ₹2,400, saw an opportunity to increase it by ₹100 per employee per year.
Revenue Impact:
With nearly 40 lakh employees paying an additional ₹100 per year, this translates to ₹40 crore in extra revenue—bringing the total professional tax collection to ₹1,000 crore annually!
