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
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.
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