Property agents in Hyderabad know about the nitty-gritty of taxation policies concerning a property purchase. Lands for development in Hyderabad are very valuable to purchase.

The term fair market value is referred to throughout the Internal Revenue Code existing among other federal statutory laws in the USA which includes bankruptcy, many state laws, and several regulatory bodies. Property agents in Hyderabad do the needful.

The concept of the fair market value of a property is considered to be very important to the buyer as well as the seller for several reasons. This is so important under the Income Tax laws. If the transaction price as stated in the sale agreement is much lower than the fair market value of the property, then both the seller as well as the buyer will be impacted by different provisions of the Income Tax laws.

Lands for development in Hyderabad are manifold and naturally, buyers and sellers have to adhere to taxation policies.

Why Determining Fair Market Value is Essential?

Taxation is imposed on profit is made on the sale of a property. The profit is usually determined by deducting the cost of acquisition along with the cost of improvement, from the sale consideration amount. In case the property is held for more than two years, a person is allowed to avail of the benefit of indexation, on the costs.

If the sale price of a property is lower than the property registration valuation, the registration valuation is indeed taken as the fair market value. This is rather considered based on the stamp duty that is being paid during the property registration.

The difference existing between the agreement value as well as the fair market value, if it is more than 5%, is rather taxed in the hands of the buyer, as well as the seller, under of course different provisions of the income tax laws. Therefore, it is important to arrive at the fair market value, before executing the agreement, in order to avoid the payment on such difference.

How to Determine Fair Market Value of a Property

Based upon the Income Tax Act, 1961, fair market value needs to be the higher of the two considerations mentioned below.

The cost of acquisition of one’s property, or perhaps, the price that the property shall ordinarily sell if sold for in the open market. Yet, there is no fixed formula to calculate the fair market value of a property. One technique that needs to be widely used is to look at the sale instances of similar properties in the same neighborhood.

Fair Market Value of One’s Property and its Importance

In order to calculate capital gains on properties bought before 2001, the base year of the cost inflation index, a person needs to know the fair market value of a property in 2001.

However, it is not as easy to be able to find out the fair market value of a property as it seems, because the real estate market is indeed the very diversified market, where the rates of properties can indeed vary very much, even within the same area. It does become more difficult, in case you have to find out the fair market value for properties as old as 2021.

Another option in order to calculate the fair market value of properties is to focus on the circle rates or ready reckoner rates as they are referred to.

happen to be the floor rates below which no property can be sold and registered in a particular area. Circle rates are notified and revised regularly by local authorities in order to keep them as close to the prevailing..

How about a Valuation Report?

Most experts do believe that sellers need to take the help of a registered property values, rather than arbitrarily making a decision about the fair market value of one’s property. Assumptions of any sort of type for consideration of value shall not be entertained by the income tax department. In case of any inquiry, the department will indeed provide a higher weightage to the value stated in the valuation report from a registered valuer.

Government-approved valuers do follow a standard process for the valuation. Property agents in Hyderabad are fully aware of rules and regulations of taxes that are imposed on property purchases.

Leave a Reply

Your email address will not be published. Required fields are marked *