This circle rate is considered a minimum market rate for
calculating income tax, property tax and duties applicable
for the transaction. The circle rate, in most cases, is much
lower than the actual market value, in some cases even by
a factor of 10! This precarious situation gives rise to the
scenario where property transactions get registered at a
circle rate to optimize on duty and taxes while the actual
transaction takes place at market value. While documenting
lawful source of funds based on a property transaction, this
situation needs to be navigated carefully.
TAX DEDUCTION
The Income Tax Act also lays down
rules for deducting tax of the source
for various types of transactions like
expenses and property purchase.
When funds for an EB-5 investment
are derived from a sale of a property,
it is impe rative to de mons trate
that the payment of purchase
consideration was subjected to tax
deduction, as per the rules, by the
buyer. The buyer in turn is required
to deposit tax to be deducted at the
source with the Income Tax department to the credit of
seller within a stipulated time period of deducting the same.
Once the tax is deposited by the buyer to sellers credit,
the same gets reflected in the records of the Income Tax
department and can be demonstrated in a source of funds
documentation by downloading relevant forms and reports
from the Income Tax Department portal (i.e. Form 26AS).
REMITTANCE
To determine the path of funds, one important law to keep
in mind is the Foreign Exchange Management Act which
is corroborated by regular guidelines by the Reserve Bank
of I n dia . U n d e r th e L ib e r alize d
Re mi t tanc e S c he me (L R S), any
Indian reside n t is p e r mi t te d to
remit up to $250,000 per person
per financial year (Financial
Year in Indian c on tex t is A p ril -
March) outside India without prior
permission of the Reser ve Bank
of India. It is also pertinent to note
that even minors have the same
remittance limit as adults, hence,
they can also remit up to $250,000
per financial year, provided they
have a Permanent Account Number.
That is a unique registration number
issued by the income tax depar tment. However, any
remittance in excess of this amount or in contravention of
"In order to demonstrate
clear title of a male
member, a relinquishment
deed must be executed by
all the female siblings."
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