New Delhi, July 10: The roka is now taxable.
When people strike a deal on the acquisition of a property, the buyer usually pays a small advance — generally called roka — to the seller. The token payment affirms that the buyer is serious and intends to go through with the deal. The roka is usually forfeited if the buyer backs out.
The government now proposes to bring this income within the ambit of tax.
Section 56 of the Income Tax Act deals with “income from other sources” — which is a portmanteau term that envelops every sort of income that is not excluded from the concept of total income and isn’t chargeable to tax under any head.
The Modi government is now introducing a new sub-section (2) to Section 56. It will “provide for the taxability of any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset,” says the explanatory memorandum that accompanies the Finance Bill.
The Finance Bill says any such money received as an advance or otherwise in the course of negotiations for the transfer of a capital asset will become taxable if (a) such sum is forfeited and (b) the negotiations do not result in transfer of such capital asset.”
The explanatory memorandum says there will be a consequential amendment in clause 24 of the Section 2 to include such sum in the definition of the term “income”.
The existing provisions of Section 51 provide that any advance retained or received shall be reduced from the cost of acquisition of the asset or the written down value or the fair market value of the asset.
In order to avoid double taxation of the advance received and retained, Section 51 is also proposed to be amended.