In India, property owners have the freedom to sell their property at any mutually agreed-upon price between the buyer and the seller. However, it is important to note that government charges such as stamp duty, Surcharge, registration fees, cess, and TDS (Tax Deducted at Source) are calculated based on either the declared sale price or the government-determined guidance value of the property—whichever is higher.
What is Guidance Value?
The guidance value (also known as circle rate or ready reckoner rate in some states) is the minimum value set by the government for properties in a particular area. This value is used as a benchmark for calculating the applicable government charges during a property transaction.
Illustrative Scenarios:
- Scenario 1:
- Selling Price: ₹10
- Guidance Value: ₹100
Applicable Government Charges: Based on ₹100 (the higher of the two)
- Scenario 2:
- Selling Price: ₹150
- Guidance Value: ₹100
Applicable Government Charges: Based on ₹150 (the higher of the two)
Why Does This Matter?
Under-reporting of sale prices to reduce government fees is discouraged by this mechanism. By ensuring charges are based on the higher of the actual sale price or the guidance value, the government minimizes revenue loss and maintains transparency in property transactions.
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