In a tacit acknowledgment that it is virtually impossible to stamp out black money from real estate deals, income tax officials are in favour of a new levy on such transactions.

The suggestion is to introduce a "capital transaction tax" based on the "circle rate" of the state in which the deal is registered.

The reason for the move, which may be part of next year's tax proposals in the Budget, is to ensure that the exchequer gets some revenues from the real estate boom.

"The tax could be levied at the rate of one per cent on the declared value of the transaction either on the seller or the buyer. Property values are skyrocketing in the country and we know that there is massive under-reporting of actual transaction value," said a senior government official.

"Buyers and sellers under-value property transactions to avoid paying high stamp duty and income tax, but they pay the brokers a fee, say, 1 per cent, on the entire value of the deal. The capital transaction tax can be levied at a very marginal rate, with the base being the existing circle rate in the local area," the official added.

Circle rates are area-based minimum rates applicable for registration of properties and vary from state to state. For instance, Delhi has been divided into eight circles � graded A to H � and the circle rates vary from Rs 6,000 to Rs 43,060 per square metre.

Typically, the cash-to-cheque or draft payment ratio (also called black and white in real estate circles) is 60:40.

In housing deals that are financed through institutional loans, the incidence of black money is lower. However, land deals, for which finance is harder to come by, tend to have a higher black money component.

It is such transactions on which income tax officials are focused. All real estate transactions of Rs 30 lakh and above have to be reported to the tax authorities by the registrars of properties.

This is a mandatory commitment as part of the Annual Information Return of seven different high-value financial transactions required to be furnished under section 285BA of the Income-Tax Act, 1961, by specified individuals and agencies.

In 2006-07, the number of real estate deals worth Rs 30 lakh and above went up by 40 per cent to nearly 108,000 across the country.