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Cash payment from land sale

Srikanth (manager) (34 Points)

04 December 2012

HI ,

I am planning to sell a plot of land which has a stamp value of 20 lacs for which the buyer is stating that he will give me only cash and not a DD. So is it okay to accept such a large amount of cash as per the IT act?

regards

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8 Replies

satish kumar voleti (A.C.A., (ICWAI)) (1686 Points)
Replied 04 December 2012

please do not accept cash... you many not be able to tell the source of income, receive either DD or Cheque... and deposite it into your bank account....

many people in order to avoid the payment of capital gain tax, they take cash and later they face many problems...

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Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 04 December 2012

No it is not at all acceptable to accept the entire amount of land sale in cash from teh buyer. It will attract to you huge tax liability as it would be unexplained cash. Yes some part(say2-3lacs) you may accept in cash which is normal.

You should insist the buyer to pay the amount by DD only. Also you can open an account with the buyers bank and get the DD encashed immediately to your account, to avoid and mischief.

Srikanth (manager) (34 Points)
Replied 04 December 2012

Does the IT act state that cash transaction above Rs 20000 are not allowed?

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 04 December 2012

Yes it does, but your case is not covered by that. In your case the provision of section 69A Unexplaiend money would get attracted & all of the money recd by you in cash would be deemed to be your income & tax would be requried to be paid accordingly.

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3469 Points)
Replied 04 December 2012

Further to above replies, I wish to add that cash transactions in excess of 20,000 is prohibited in case of loans and deposits.

You may advise the buyer to deposit the cash directly to your bank account.

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Ramakrishna Kamat (CA) (76 Points)
Replied 04 December 2012

If the sale consideration for the sale of land as per the sale deed is Rs. 20 Lakhs then there is no restriction under the income tax act on accepting it in cash. The provisions of Sections 40A (3) or 269SS or 269T are not applicable in such case. Hower the tax on capital gain earned is to be paid irrespective of the mode of receipt of sale consideration.

CA. JAIN (Chartered Accountant) (466 Points)
Replied 04 December 2012

It doesnt matter under income tax to purchase/sale property through bank. U can even purchase and sale by only the mode of cash.

Seller point of view:

If you receive amount 20 lakhs through bank for property . U have to pay tax on capital gain(subject to exemption).

Even u receive in cash u have to pay capital gain tax.

But 95% people in india dont pay income tax specially in case of land/property.(Reason-system failure/high tax rates)

So for this people accept some part in cash/and some part in cheque. and even people prepare documents for less amount to save themself from duty of stamp.

Note; if u receive full amount through cheque, u have to pay huge capital gain tax.

By adopting cash mode people invest that amount in undisclosed assets.(This is known as black money)

From buyer point of view:

If u pay through bank...u have to give full datails about source of that money. and if buyer got that money from another source(like sale of another property) then liability of capital gain tax arise for buyer.

Conclusion: U can sale/purchase property through cash mode.

Some people are saying u shld get money through bank. because cash received will be known as unexplained money/cash . Fully irrelevant. Because u have to even explain that amount if u get through cheque.

Thanks,

SWEETLENE (manager accounts) (25 Points)
Replied 05 December 2012

Hi, If the seller is going to pay applicable taxes, he can always explain how he received the funds by cash, i believe. He can deposit the cash in the bank and show the sale deed as proof of / source of the income.

Hope i am not wrong..!!