What are the Different Purposes for Valuation of House?
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It is generally carried out once the construction of the house has come to an end or during its life. A valuation can help you to evaluate the current market value of your house.
There are various reasons why people carry out the valuation and they are as under:
- To ascertain fair market value for purchase or investment or occupation or for sale. Owner will like to assess what value in money terms he would realize if he wants to sell the house or what he will have to pay, if he wants to buy a house.
- To obtain loan for purchasing the property from financial institutions. Bank would like to know the fair market value before deciding how much they can lend you depending upon your repayment capacity.
- To ascertain fair market value for the purpose of mortgage or for security for other purpose.
- Rent fixation, Standard Rent etc.
- To determine the return on investment.
- During acquisition by government authority, if you want to challenge the award the compensation awarded by the revenue / Govt. authority.
- Value for assessing house tax by municipal / local authorities.
- Insurance for insuring the house against damages like Fire, Earthquake, Flood, Riots etc.
- Partition in the family : This is most commonly required so as to make fair and just partition amongst members / co-partners of Hindu Undivided Family – HUF.
- Auction bids : To determine either ‘offset’ value i.e. minimum value people have to bid during action or if you want to participate in the auction bid, how much one should bid.
- Stamp duty and court fee purpose: What amount of stamps you need to pay during court cases, documentation, registration of property etc.
- Betterment charges, It is levied by Town Planning authority and valuation is required if you want to challenge it.
- Probate : It is the name of instrument awarded by court allowing transfer of property based on the will of the deceased to their heirs.
Income tax :
- Cost of construction : For determining investment during filling of income tax return or during assessment / scrutiny, ITO would like to ascertain whether you have not used Black-money or unaccountable income during construction and are not showing less cost of the house than actual incurred.
- Capital gain tax : To determine the fair market value as on 01/04/1981 so as to arrive at the incidence of Capital Gains Tax. It is the difference of value as on the date of sale and value of the property as on 01/04/1981 (indexed as per inflation indices as per RBI guideline).
- Wealth tax : It is worked out as per Wealth Tax Rules 57-A.
- Valuation for specific rights, e.g. Valuation of leasehold right, in the property, valuation of lessor’s right.
- VISAs from foreign embassies : Many embassies will like to know how much assets do you hold in your native country before granting you VISA.