Payment exceeding rs.20000/- in respect of purchase of plot

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

28 December 2012 I have recently purchased a plot and on agreement date paid a sum of Rs.60,000/- in cash to the seller. Whether the same will be order according of Income Tax Laws

Sanket

Sanket (Expert)
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30 December 2012 In view of the provisions of the INCOME TAX ACT,1961, any payment above RS.20000 will be disallowed at a flat rate of 20% of entire amount and not the excess amount over 20000.(i.e.if land is purchased for Rs.100000,the disallowace would be 100000*20%=20000 and not (100000-20000)*20%. accordingly the value of land will be taken at a low figure for income tax purposes against which less depreciation shall be allowed, thereby increasing your profits and ultimately taxes.SINCE LAND IS TAKEN AS A NON DEPRECIABLE ASSET FOR INCOME TAX PURPOSES,YOU MAY NOT BE AT A LOSS.HOWEVER, in order to be at a safer side & avoid various legal consequences, payment above Rs.20000 should be made through cheques only.