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The Uttar Pradesh government has introduced a regulation to charge stamp duty according to circle rates on the registration of power of attorney for non-relative property sales. The move follows an observed increase in stamp duty evasion incidents where builders manipulated legal loopholes to purchase land from farmers at reduced costs.
The Uttar Pradesh Cabinet has given its nod to this regulation in response to a prevalent scheme employed by developers to sidestep paying stamp duties. In this scheme, builders would secure a power of attorney from landowners, particularly farmers, granting them the authority to sell their property without the standard exchange of deeds and thus, without incurring stamp duty.
Minister of Stamp and Registration, Ravindra Jaiswal, disclosed that builders, not just from Uttar Pradesh, but also from Delhi and Haryana, were exploiting this loophole by registering their power of attorney in Noida. This manipulation came to light during a series of such incidents in Ghaziabad and Noida.
Jaiswal explained the intricacies of this ploy: "The builder obtains the power of attorney from a farmer, empowering him to sell the farmer's land and receive the payment on his behalf. The registration of the power of attorney comes at a minor cost of Rs 10, Rs 20, or Rs 50. The builder then sells the land, gives the farmer a portion of the proceeds, and pockets the rest, bypassing any stamp duty since no conventional sale has occurred."
This dodging of stamp duty on the initial sale - from the farmer to the builder - resulted in substantial losses to the government. However, the minister acknowledged that it was challenging to quantify the exact financial impact on the state.
The new rule stipulates that even if a power of attorney is granted, if it involves the rights to sell a property, then stamp duty based on the circle rate of the land will apply. This measure is targeted at non-relatives, whereas, in cases involving family members, a base charge of Rs 5,000 will be levied for registering the power of attorney.
In conclusion, the newly implemented rule in Uttar Pradesh represents the government's step towards plugging tax loopholes and ensuring more equitable transactions in the property sector. The move underscores the state's commitment to maintaining financial transparency while safeguarding the interests of farmers and other landowners.
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