Purchase of independent house

This query is : Resolved

M.Purushothama Reddy (Querist)
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04 January 2016 HI SIR

I AM PURCHASING 200 SQ YARDS PLOT(1800 SQ FEETS). THE PERSON(PVT LTD) WHO IS SELLING PLOT HIMSELF WILL BUILD THE HOUSE IN 1200 SQ FEET FLOOR AREA. THEY ARE CHARGING RS. 3650000.
I WANT PAY TOTAL AMOUNT THROUGH CHEQUE. THE PLOT SELLER CUM BUILDER SAYS PAY PART AMOUNT I.E GOVT VALUE THROUGH CHEQUE REMAINING AMOUNT THROUGH CASH.
WHAT KIND OF TAXES WILL APPLY TO COMPANY IF I PAY CHEQUE TOTAL AMOUNT. WHAT ARE THE SUGGESTION TO COMPANY TO AVOID OR MINIMISE THE TAXES FOR COMPANY IF IT ACCEPTS THE TOTAL AMOUNT THROUGH CHEQUE.

CA CMA CS Ram Pavan Kumar Melam

CA CMA CS Ram Pavan Kumar Melam (Expert)
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04 January 2016 Construction industry is the most unorganized one, dealing in huge amounts of unrecorded cash transactions. The measures taken so far by the government, including introduction of several provisions in the Income Tax Act could not curb the same. Your builder also part of the system and it alone cannot do right things by complying the provisions of various laws and setting aside the ongoing system in the industry.
The builder company would have paid for land as per government value, so its deductible expense is less than what it paid to the transferors of the land. If it accepts full value of consideration from you, it cannot match the expenses incurred vs income earned. So ending up in paying higher amount of Income tax. Moreover, most of the building materials such as sand, metal, bricks, wood, hardware, marble, granite, tiles, etc. are available without bill or with partial bill.

Rates, taxes, cess etc. applicable are:
1. Service Tax;
2. VAT;
3. Labour cess;

Apart from reimbursing the above, you have to incur stamp duty, registration and other expenses relating to registration for execution of composite sale deed in your favour for both land and building or registering a construction agreement and sale deed for land.