Kathmandu, September 9
The government has urged the land registration offices to strictly follow the rule of sending the details of land transactions worth Rs one million and above to the Financial Intelligence Unit (FIU) of Nepal Rastra Bank (NRB). To curb the rampant practice of evading taxes by declaring a price that is well below the amount that the land was actually sold for, the government has kept the land registration offices under its scanner.
The government recently raised the valuation of land and the land registration offices have been asked to look into that valuation while transferring the land from land/house seller to the purchaser.
The Ministry of Finance (MoF) has said that sellers of land and houses have been evading the capital gains tax and those purchasing land or house are also declaring a low value to evade the land registration tax. Those purchasing aland/house have to file 15 per cent capital gains tax as tax deducted at source (TDS) on behalf of the seller and the seller also has to submit 10 per cent capital gains tax, according to MoF officials.
Along with the revaluation of the land, the MoF has urged the land registration offices through their parent ministry — Ministry of Land Management, Cooperatives and Poverty Alleviation — to be strict and report all transactions of the threshold value to the FIU.
Deputy Governor of the central bank Chinta Mani Siwakoti, has said that those who sell land by undervaluing the price can be caught any time for tax evasion as the government has activated multiple windows for cross-verification. As the banks need to report about the deposits and transactions of Rs one million and above to the FIU, the Financial Intelligence Unit can easily track those who have carried out transactions of land and houses at a value that is lower than the actual price.
Those who evade taxes during land and house transactions can be penalised under the Asset (Money) Laundering Prevention Act, according to the deputy governor. “Those who sell property by declaring a value lower than the actual rate will not be able to justify the income source and the Asset (Money) Laundering Prevention Act has provisioned that asset (money) that comes from unidentified sources will be treated as cases of money laundering,” said Siwakoti.
He also said that the central bank is aware about the use of such money (that comes from the undervaluation of land/house which cannot be disclosed as legal source) for hundi. Siwakoti further mentioned that the central bank and FIU are investigating the undervaluation of property during transactions that has helped the practice of hundi thrive.
A version of this article appears in print on September 10, 2018 of The Himalayan Times.