Penalty on purchase of agricultural land in cash
This query is : Resolved
27 April 2020
Sir can i purchase agricultural land in cash by paying consideration of rs.15 lakhs.
28 April 2020
If you pay consideration for purchase of Agricultural Land or for that matter any other property the recipient of the consideration will be hit by provisions of s. 269SS and 269ST. As far as purchaser is concerned there is no implication if he pays purchase consideration in cash unless he is purchasing the property as stock in trade and in that case s. 40A(3) would trigger.
In addition provisions of s.50C and s. 56(2)(x) are also to be borne in mind.
In addition provisions of s.50C and s. 56(2)(x) are also to be borne in mind.
28 April 2020
Since you are the purchaser and Agricultural Land is non-depreciable asset, there is no problem of yours and you can purchase the land by paying cash.
28 April 2020
Of course, purchaser of agricultural land buying it as a capital asset would not be affected but the seller will be in trouble. In Chhattisgarh state the Registrars do advise that the transaction of Rs.20,000 or more should not be there in Cash against transfer of a property.
29 April 2020
In my opinion that the Registrar has said so on his opinion in accordance with section 40A(3) of income tax. act. Registrar is guided only by the registration act not Income Tax. Ask to show the law where it has been mentioned.
08 May 2020
Having cash transaction on such important purchase is very risky. To clarify, it is mandatory to quote PAN for sale/purchase of immovable property exceeding Rs 10 lakh. It should not be confused with cash payment. In layman terms, max cash payment allowed is only Rs 20,000.
Builder/seller lure buyers for Cash Payment in a Property Deal to Save Stamp Duty and Registration Charges, Capital Gains Tax, & Black money. Cash Payment in Property Deal is very High Risk for a Buyer.
Moreover, if God forbids something goes wrong after the payment of cash say the deal is cancelled, or something happens to the seller. In one of the case, the complainant paid cash on the day of registration. On the way to sub registrar office, the seller died in an accident. It is highly unlikely scenario but a possibility. Now the total cash component is gone for the buyer. If property deal is cancelled, then it is impossible to recover the cash component from the seller.
A Penalty of 100% can be levied on Cash Payment.
As a buyer, you have to decide whether you would like to take a risk in property deal as i highlighted. Also, note that all the cash transactions are being monitored. Any unusual cash transactions from a bank account will immediately put you under the scrutiny of income tax department. I am not creating fear but requesting all the readers not to encourage illegal practices. Be a good citizen of India and make all payments through legal channel. Any cash transaction of more than 20,000 should be done responsibly and carefully.
From 1 June 2015, transactions in immovable properties for cash in excess of Rs 20,000 were also barred.
An additional bar was put on cash transactions in excess of Rs 20,000 in Section 269SS of the Income Tax Act, 1961 (the IT Act) vide Finance Act, 2015, with effect from 1 June 2015. Prior to that date, transactions in loans and deposits in excess of Rs 20,000 in cash were barred. From 1 June 2015, transactions in immovable properties for cash in excess of Rs 20,000 were also barred.
It is significant to note that agricultural land is as much hit as any other immovable property but the proviso to Section 269SS makes a volte face by saying if both the purchaser and seller are having only agricultural income and no other income taxable under the IT law they would be spared from the compliance of the whole Section. Be that as it may, others flouting this Section would be punishable with a penalty equal to the amount of cash transaction even if the excess over Rs 20,000 is just Rs 100. Section 271D makes it mandatory on the joint commissioner of income tax to slap this penalty without any leeway or exemptions.
In 2017, Section 269ST was ushered in which prohibited non-immovable property, non-loans and non-deposits cash transactions in excess of Rs 2 lakh but the corresponding penalty regime introduced vide fresh Section 271DA gives latitude to the joint commissioner to condone the 100 percent penalty on the seller for good and sufficient reasons. Thus, if a jeweller accepts cash payment of Rs 3 lakh from a temple trustee, perhaps he would not be subjected to the 100 percent penalty, i.e. Rs 3 lakh for violation of Section 269ST on the ground that the temple in any case is not a tax payer under Section 11 of the IT law. Also, perhaps if the jeweller has disclosed the cash receipts in his books of accounts and is thus offering the same to income tax. No such latitude for transactions in immovable property.
Builder/seller lure buyers for Cash Payment in a Property Deal to Save Stamp Duty and Registration Charges, Capital Gains Tax, & Black money. Cash Payment in Property Deal is very High Risk for a Buyer.
Moreover, if God forbids something goes wrong after the payment of cash say the deal is cancelled, or something happens to the seller. In one of the case, the complainant paid cash on the day of registration. On the way to sub registrar office, the seller died in an accident. It is highly unlikely scenario but a possibility. Now the total cash component is gone for the buyer. If property deal is cancelled, then it is impossible to recover the cash component from the seller.
A Penalty of 100% can be levied on Cash Payment.
As a buyer, you have to decide whether you would like to take a risk in property deal as i highlighted. Also, note that all the cash transactions are being monitored. Any unusual cash transactions from a bank account will immediately put you under the scrutiny of income tax department. I am not creating fear but requesting all the readers not to encourage illegal practices. Be a good citizen of India and make all payments through legal channel. Any cash transaction of more than 20,000 should be done responsibly and carefully.
From 1 June 2015, transactions in immovable properties for cash in excess of Rs 20,000 were also barred.
An additional bar was put on cash transactions in excess of Rs 20,000 in Section 269SS of the Income Tax Act, 1961 (the IT Act) vide Finance Act, 2015, with effect from 1 June 2015. Prior to that date, transactions in loans and deposits in excess of Rs 20,000 in cash were barred. From 1 June 2015, transactions in immovable properties for cash in excess of Rs 20,000 were also barred.
It is significant to note that agricultural land is as much hit as any other immovable property but the proviso to Section 269SS makes a volte face by saying if both the purchaser and seller are having only agricultural income and no other income taxable under the IT law they would be spared from the compliance of the whole Section. Be that as it may, others flouting this Section would be punishable with a penalty equal to the amount of cash transaction even if the excess over Rs 20,000 is just Rs 100. Section 271D makes it mandatory on the joint commissioner of income tax to slap this penalty without any leeway or exemptions.
In 2017, Section 269ST was ushered in which prohibited non-immovable property, non-loans and non-deposits cash transactions in excess of Rs 2 lakh but the corresponding penalty regime introduced vide fresh Section 271DA gives latitude to the joint commissioner to condone the 100 percent penalty on the seller for good and sufficient reasons. Thus, if a jeweller accepts cash payment of Rs 3 lakh from a temple trustee, perhaps he would not be subjected to the 100 percent penalty, i.e. Rs 3 lakh for violation of Section 269ST on the ground that the temple in any case is not a tax payer under Section 11 of the IT law. Also, perhaps if the jeweller has disclosed the cash receipts in his books of accounts and is thus offering the same to income tax. No such latitude for transactions in immovable property.
09 May 2020
I do not agree with the view of the expert. The law should be read as it is. Neither there can be any fear nor any favour. Law shall move on its own way. Unnecessary fear will make the movement miserable. Cash is legal tender. So payment through this can never be illegal. For example there is no bar for payment of cash for personal expenses. However, there is some restriction for the business people.
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