Real Estate Transaction Structuring with Power of attorney & Beneficial Ownership
This query is : Resolved
09 April 2025
URGENT!!!!
I have 4 clients who together have invested in a Real estate colony (Converted a large agricultural land to residential plots) , but the title deeds are in the names of 4 third parties. My clients want to control the sale process and receive payments directly.
Plan: Create a partnership firm (owned by clients) and take registered Power of attorneys from the land owners. The firm will act as an agent, sell the land, collect proceeds in its own bank account, deduct its commission, and remit the balance to the third parties at year-end.
Capital gains tax will be deposited in the names of the third-party title holders only.
Example: If a plot is sold for ₹100, the firm collects the full ₹100, deducts ₹10 as commission, and remits ₹90 to the land owner. This is repeated for all plots, and settlements are done annually i.e Rs 90 will be remitted back in third party's bank account.
The goal here is not tax evasion but just to take the token amounts and sale proceeds in client's account so that they are not dependent on third parties to collect the money.
Is this structure valid from Income Tax and compliance perspective? Any risk of the firm being taxed on the gross receipts?
I have 4 clients who together have invested in a Real estate colony (Converted a large agricultural land to residential plots) , but the title deeds are in the names of 4 third parties. My clients want to control the sale process and receive payments directly.
Plan: Create a partnership firm (owned by clients) and take registered Power of attorneys from the land owners. The firm will act as an agent, sell the land, collect proceeds in its own bank account, deduct its commission, and remit the balance to the third parties at year-end.
Capital gains tax will be deposited in the names of the third-party title holders only.
Example: If a plot is sold for ₹100, the firm collects the full ₹100, deducts ₹10 as commission, and remits ₹90 to the land owner. This is repeated for all plots, and settlements are done annually i.e Rs 90 will be remitted back in third party's bank account.
The goal here is not tax evasion but just to take the token amounts and sale proceeds in client's account so that they are not dependent on third parties to collect the money.
Is this structure valid from Income Tax and compliance perspective? Any risk of the firm being taxed on the gross receipts?
10 April 2025
Yes, valid.
Depends upon the way, power of attorney constituted...
Depends upon the way, power of attorney constituted...
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11 April 2025
Thank you for your reply sir, So should I constitute a general power of attorney and specify the structure while drafting it?
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11 April 2025
Yes, after constitution of the partnership firm....
Get the selling rights with financial management powers ......
Get the selling rights with financial management powers ......
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11 April 2025
Is there any risk of the firm being taxed on the gross receipts if the case comes under scrutiny?
11 April 2025
No, if the firm has accepted the job on sole selling agency/brokerage terms... Sign such contract with the land owners.
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11 April 2025
Okay sir I really appreciate your support, Thank you.
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11 April 2025
Good luck.
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