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Advise

payal (Study) (106 Points)

23 June 2016

if a person has 20 lakh in home saving from many years but show his return nil wants to purchase a house in which cheque is require but he never showed his income what he should do , for purchasing house he should take loan and at time of installment pay from that amount ,is their any other option so that he can use his money without tax implication

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8 Replies

(Guest)

what do u mean by home savings ? is it undisclosed "taxable" income or is it exempt income...

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CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 23 June 2016

Ms Parul, please explain the source of such amount. It seems from your explanation that it is unaccounted money.

RBGohil (Associate) (41 Points)
Replied 23 June 2016

If amount saved by him pertains to previous years where his income does not exceed the minimum exemption limit then he can use the same....but the quantum of amount you mentioned, it seems that he was liable for tax in previous years but he didn't offer for it, unless the inome earned by him is from the source which are exempted like dividend etc

payal (Study) (106 Points)
Replied 24 June 2016

Person has a shop , he never deposit his saving in banks , he kept in home , after many years he observe that he has 20 lakh and wants to purchase a plot , he require cheque for purchase ,his return always goes nil , how he should use his money for purchase of house

Ravi kumar agarwal (CA Student) (48 Points)
Replied 24 June 2016

Dear Parul,

As per the facts

1. The person is a shopkeeper.

2. Amounts is related to his savings.

3. He filed return by showing his Income NIL

4. Now he want to purchase plot from these savings.

I think you should go with your plans to take loan and purchase house, with paying installment from these house.

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CA shanky pahoja (accountant) (615 Points)
Replied 24 June 2016

first of all there is no problem in keeping money at home. if person is not liable to tax there is no requirement of filling return.

now if house is purchased out of this sum. it is unlikely that you will get any tax notice cause registrars are required to report only those sale and purchase of immovable property if value of it is equal to or more than 30 lacs. however if you take loan to buy a property than you will be sreved tax notice ( you can also disscuss this matter with the bank)

they are required to report loans of amount exceeding 5 lacs as per the requirement of annual information return.

but if the person were never liable to tax he should not be afraid there will not be any penalty or liabilty.

hope it will help you

CMA-FINAL (Adv.) (243 Points)
Replied 24 June 2016

We have entered into grey area here but I would like to know advise of tax managers for understanding purpose only, how will you manage this transaction?

In my view, if the amount is only to be used for payment of installment, then its not difficult to show parts of this amount as income in upcoming years.

However, any payment directly through cheque without routing it through loan mode might get caught in assessment and its a risk not worth taking.

The A.O.s in my experience have the habit of adding extra amount to amount already declared if the property and investment and expenses look disproportionate.

So if the payment is paid directly through cheque the assessee might suffer some visits to ITO and also some penalties and interest.

Can an experienced tax practitioner please analyze such transaction for academic purposes ?