What is the Ready Reckoner Rate?

What is the ready reckoner rate?

Ready reckoner rate, also known as circle rate or guidance value, refers to the minimum valuation set by the state government for properties in a particular area. It serves as a benchmark for calculating various taxes, charges, and fees related to property transactions, including stamp duty and registration fees.

How is the ready reckoner rate determined?

The government-appointed authorities, such as the revenue department or municipal corporation, periodically assess and revise the Ready reckoner rates for different localities based on various factors. These factors may include:

1. Location: Properties in prime locations with better infrastructure and amenities generally have higher ready reckoner rates compared to those in less developed areas.
2. Market trends: Real estate market dynamics, including demand-supply dynamics, prevailing property prices, and trends in property transactions, influence the Ready reckoner rates.
3. Property characteristics: Factors such as plot size, dimensions, accessibility, proximity to amenities, and development potential are taken into account while determining the Ready reckoner rates.

Implications of ready reckoner rate

Understanding the implications of the ready reckoner rate is crucial for property owners and buyers in India. Some key implications include:

1. Stamp duty calculation: The stamp duty payable on property transactions is calculated based on the Ready reckoner rate or the actual transaction value, whichever is higher. Therefore, a higher Ready reckoner rate may result in higher stamp duty expenses for buyers.
2. Registration charges: Registration fees for property transactions are also computed based on the Ready reckoner rate or the transaction value, impacting the overall cost of property registration.
3. Tax assessment: The ready reckoner rate serves as a reference for property tax assessment by municipal authorities. Higher Ready reckoner rates may lead to increased property tax liabilities for owners.

How to check the ready reckoner rate?

In most states, the Ready reckoner rates are published and made available to the public by the respective state government's revenue department or municipal corporation. Property owners and buyers can access the Ready reckoner rates through:

1. State government websites: Many state governments provide online portals or websites where users can search and download Ready reckoner rate schedules for different areas.
2. Local revenue offices: Physical copies of Ready reckoner rate schedules are often available for inspection at local revenue or municipal offices. Interested individuals can visit these offices to access the rates.

What is the impact of selling properties at lower than ready reckoner rates?

Selling properties below the Ready reckoner rates can have several implications and potential consequences for both the seller and the buyer:

For the seller:

1. Tax implications: Selling a property below the Ready reckoner rate may attract scrutiny from tax authorities. They may view the transaction as an attempt to evade taxes by undervaluing the property. In such cases, the seller may be liable to pay taxes on the differential amount between the actual sale price and the Ready reckoner rate.
2. Penalties and fines: Tax authorities may impose penalties and fines on sellers found to be underreporting the sale price of their property. These penalties can be substantial and may significantly impact the seller's finances.
3. Legal consequences: Selling properties below the Ready reckoner rates can have legal repercussions. Authorities may initiate legal proceedings against the seller for tax evasion or violation of property laws.
4. Difficulty in future transactions: Undervaluing a property in one transaction can create difficulties for the seller in future transactions. Prospective buyers and lenders may be wary of purchasing or financing a property with a history of undervaluation.

For the buyer:

1. Limited financing options: Lenders typically assess the value of the property based on the Ready reckoner rate or the sale price, whichever is higher. Purchasing a property below the Ready reckoner rate may limit the buyer's ability to secure financing, as lenders may be reluctant to lend based on a lower valuation.
2. Potential tax implications: Buyers may face tax implications if they purchase a property below the Ready reckoner rate. Tax authorities may consider the differential amount between the actual purchase price and the Ready reckoner rate as undisclosed income, subjecting the buyer to taxes and penalties.
3. Resale value concerns: Buying a property below the Ready reckoner rate may affect its resale value in the future. Prospective buyers may perceive the property as undervalued, impacting its marketability and potential resale price.
4. Legal risks: Purchasing a property below the Ready reckoner rate may expose the buyer to legal risks, including potential disputes with tax authorities or legal challenges from other stakeholders.