Circle Rate in India: Everything You Need to Know About Circle Rate

Circle rate, also known as Ready Reckoner Rate or Guideline Value, is a crucial aspect in every property transaction taking place in India. Understanding what is circle rate is essential when assessing, buying or selling a property. It also helps in calculating taxes for a property. 

The government sets and revises the circle rate for different localities in a city or state. Based on the price speculations, it determines the minimum price at which a property can be sold. Moreover, the government consistently checks it to align it with the current market rates. In the following sections, we will break down the circle rate meaning, significance, and everything else you would want to know.

What is Circle Rate?

Circle rate is the minimum price at which a property transaction can legally take place. The government sets this price for various areas within a region or city. The circle rate list may vary for different areas, and the local authorities periodically update them based on the current market conditions of that time.

Also Read: Current Circle Rates in Delhi

What is the Market Rate?

The market rate is the actual price of a property the buyer pays to the seller. Both parties, the buyer and the seller, mutually decide the final rate to complete the transaction. The final rate largely depends on the seller’s demand and the buyer’s willingness to pay. It is the rate mentioned in the sale agreement for a property transaction.

Also Read: Current Circle Rates in Noida

Circle Rate Vs. Market Rate

In most cases, the market rate is higher than the circle rate in an area. Although they impact each other in some aspects, a major difference between them disrupts the property value perceptions in the real estate market. This difference is a major cause of black money transactions in the market.

Circle rate and market rate are two distinct property valuation metrics crucial for real estate transactions and taxation purposes.

Importance of Circle Rate and Market Rate

Knowing the circle and market rates is essential for understanding a property's right price. Here’s why:

• Accurate Property Pricing: Knowing the circle and market rates helps understand a property's right price, ensuring you pay a fair amount.
• Loan Sanctioning: Lenders base loan amounts on the sales deed, which reflects these rates. Accurate rates ensure you get the correct loan amount.
• Smaller Gap Advantage: A smaller gap between circle and market rates simplifies transactions and reduces discrepancies in property valuation.
• Informed Decisions: Understanding these rates allows for better decision-making when buying property, ensuring a wise investment.
• Ease of Property Value Assessment: Familiarity with circle and market rates simplifies property value assessment, aiding in smoother transactions and accurate financial planning.

Also Read: Current Circle Rates in Ghaziabad

Circle Rate List Based on City

Want to know what is circle rate of property in a given area or city. Visit these official websites of different areas to find a complete circle rate list:

Stamp Duty Calculation Based on Circle Rate

A property’s stamp duty calculation largely depends on its property circle rate. The government sets this rate, representing the minimum value to register a property. Calculating the stamp duty typically involves a specific percentage of the actual transaction value or the circle rate, whichever is higher. If a property's sale value is less than the circle rate, the stamp duty applies to the circle rate to prevent undervaluation. If the property’s sale value is above the circle rate, the stamp duty applies to the transaction value to combat tax evasion and foster transparency in the sale. 

Example:

Let's consider a property transaction to illustrate how stamp duty is calculated based on the circle rate.

• Property Location: Urban area in Delhi
• Circle Rate: ₹60,000 per square meter
• Property Size: 100 square meters
• Stamp Duty Rate: 6% (for women) or 7% (for men) in Delhi

Calculation:

1. Calculate Property Value Based on Circle Rate:
   Property Value=Circle Rate×Property Sizetext{Property Value} = text{Circle Rate} times text{Property Size}Property Value=Circle Rate×Property Size Property Value=₹60,000×100=₹60,00,000text{Property Value} = ₹60,000 times 100 = ₹60,00,000Property Value=₹60,000×100=₹60,00,000

2. Calculate Stamp Duty:

• For Women: Stamp Duty=Property Value×6%text{Stamp Duty} = text{Property Value} times 6%Stamp Duty=Property Value×6% Stamp Duty=₹60,00,000×0.06=₹3,60,000text{Stamp Duty} = ₹60,00,000 times 0.06 = ₹3,60,000Stamp Duty=₹60,00,000×0.06=₹3,60,000
• For Men: Stamp Duty=Property Value×7%text{Stamp Duty} = text{Property Value} times 7%Stamp Duty=Property Value×7% Stamp Duty=₹60,00,000×0.07=₹4,20,000text{Stamp Duty} = ₹60,00,000 times 0.07 = ₹4,20,000Stamp Duty=₹60,00,000×0.07=₹4,20,000

Therefore, the stamp duty for this property would be ₹3,60,000 if registered by a woman and ₹4,20,000 if registered by a man.

Also Read: How To Convert Gaj to Square Feet Online?

Tax Implication if Market Rate is Lower than the Circle Rate

Let’s look into the tax implications if the market rate is lower than the property circle rate:

• As defined in section 56(2)(x), if any person receives any immovable property for a consideration that is less than the Stamp Duty Value, then the difference amount between the Stamp duty value and actual consideration paid, is taxable in the hands of the buyer as Income from Other Sources.
• In November 2020, Union Finance Minister Nirmala Sitharaman announced a stimulus package under Atmanirbhar Bharat 3.0 to boost the economy after the pandemic. It only applies to residential units of value up to Rs 2 Crore.

Also Read: How to Calculate Land Area in Square Feet

Everything You Need to Know Before Getting a Property Registered

Here are a few important things one must know before getting a property registered:

• Before negotiating the price, one must find out the property circle rates and keep the transaction cost as close to it as possible.
• Under-reporting a property’s value may lead to legal trouble. Hence, register the transaction for the actual amount paid for it.
• Property loan providers finance only a certain percentage of the registration amount. The buyer must pay the remaining amount as a down payment. 
• The market rate indicates the kind of area of the property location. Hence, it’s crucial to study the local market trend before selecting a property.
• In some areas, the market rates are lower than the circle rates. The registration and stamp duty charges for such properties will apply to the circle rate rather than the transaction value.
• Avoid buying a property from sellers looking to earn money through the deal.

Also Read: Stamp Duty and Registration Charges in Punjab

Conclusion

Property circle rate is a standard parameter the government sets to establish property valuations, prevent under-reporting, and avoid tax evasion. While the market rate fluctuates according to location and demand, the circle rate remains a common reference point. 

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Also Read: Convert Acre to Bigha Online

Frequently Asked Questions

1. How is the circle rate determined for a specific area?

The government sets the circle rate in a specific area according to the location and facilities.

2. Why do different areas have different circle rates?

The government determines circle rates for different areas according to the reputation and amenities in the locality. The better the locality, the higher the circle rates.

3. How often are circle rates revised or updated?

The government revises or updates the circle rates around every three years, not exceeding twice a year. It depends on the amenities in a locality, inflation rate, demand, and other factors.

4. Do circle rates differ for residential and commercial properties?

The circle rates are higher for commercial properties than residential properties. Therefore, yes, circle rates differ for residential and commercial properties.

5. Can the public access historical circle rate data for a specific area?

Different states have official websites where one can find the current and historical circle rate data for specific areas. Everyone can access this data through the platform.

6. What is the circle rate in Dehradun?

The circle rate in Dehradun is the minimum price at which a property transaction can legally occur. It varies by locality, property type, and other factors.