Increase in Safe Harbour Limit of 10% for Home Buyers - Finance Act 2021

Increase in Safe Harbour Limit of 10% for Home Buyers and Real Estate Developers Selling Such Residential Units

Finance Minister Nirmala Sitharaman is presenting Union Budget 2021-22 on 1^st Feb 2021, proposed the amendment of the provision on section 43CA and Section 56(2)(x) of the Income-tax Act 1961, As increase in safe harbour limit of 10% for home buyers and real estate developers selling such residential units.

In order to improve the demand in the real-estate sector and to enable the real-estate developers to liquidate their unsold inventory at a lower rate to home buyers, it is proposed to increase the safe harbour threshold from existing 10% to 20% under section 43CA of the Act, if the following.

CONDITIONS ARE SATISFIED :-

1. The transfer of residential unit takes place during the period from 12th November, 2020 to 30^th June 2021;

2.  The transfer is by way of first time allotment of the residential unit to any person;

3.  The consideration received or accruing as a result of such transfer does not exceed two crore rupee

Further it is proposed to provide consequential relief to buyers of these residential units by way of amendment in clause (x) of sub-section (2) of section 56 of the Act by increasing the safe harbour from 10% to 20%. Accordingly, for these transactions, circle rate shall be deemed as sale/purchase consideration only if the variation between the agreement value and the circle rate is more than 20%.

Above amendment applied with effect from 1^st April 2021.