Ad Free CAclubindia and Daily Updates on your Mobile. Subscribe Now!

Income tax for income from sale of house property

13 December 2018

A house is sold for Rs. 55 Lakhs. The guideline value as per Registration Department is Rs. 21 Lakh. In the sale deed the value is mentioned as per guideline value Rs. 21 Lakhs and paid the registration fee accordingly. Buyer paid Rs. 21 by cheque and balance amount Rs. 34 by cash. The seller is planning to buy a new house for estimated value of Rs. 65 lakhs. In the meantime seller has deposited all the amount in Bank each 50% with spouse. Please advise income tax liablity for these transactions.

Reply
Follow
Share

9 Replies

Ruchika Somani (Coaching and Practice in Tax Audit Law.) (4429 Points)
Replied 13 December 2018

Sale agreement dhould specify actual amount of 55 lacs and he may claim benefit of 100% tax free if he is buying new house of value above 55lacs.

Upgrade to CAclubindia Pro. Subscribe Now!

shubham bansal (Student CA Final ) (30 Points)
Replied 13 December 2018

receipt of cash on sale of property above 200000 attract provision of section 269T

And payment above 20000 attract provision of section 269ST

in both the cases, tax rate will be 77% approx under section 115BBE

Joe Rathinam (13 Points)
Replied 13 December 2018

Thanks Ruchika.

The issue is not declared the actual value Rs. 55 Lakhs in the sale deed and depositing the cash receipt Rs. 34 Lakhs in the fixed deposit in a bank.

In this situation I would like to know the consequences under IT Law.

Pleasae let me know.

Anoopa H P (Member of ICAI CS Executive) (192 Points)
Replied 13 December 2018

1. Sales proceed of Rs 21 lakh - index value of cost of house = Capital Gain. This will be taxable subject to tax planning.
2. Cash received Rs 34 lakh is also taxable under the provision of IT Act.

Joe Rathinam (13 Points)
Replied 13 December 2018

Thanks Anoopa.

I would like to know how much would be income tax payable for both Capital Gain and Cash receipt if a new house bought for Rs. 65 Lakhs immeidatley. And if receipt of unaccounted cash is legal? What will the legal action be taken against income tax law?

Please let me know.

Upgrade to CAclubindia Pro. Subscribe Now!

Joe Rathinam (13 Points)
Replied 13 December 2018

By ignorance the amount Rs. 34 Lakhs received by cash payment and depositing in the bank caused loss of Rs. 28.90 Lakhs (60% tax + 25% surcharge). This is done as per advise of a leading nationalised bank staff just informing " he may claim benefit of 100% tax free if he is buying new house of value above 55lacs under capital gain". Most of the house properties sale deeds are regitered as per guideline value which is much lower than tha market value which leads to this kind of issues and black money transactions. If the sale deed of the house is registered as per the actual sale value then this can be avoided. For this Governement should reduced the rate of stamp duty.

Joe Rathinam (13 Points)
Replied 21 December 2018

It has been clariffied to me by this news article pubished in The Financial Express.

Tax warning: Income Tax Department warns people not to do these transactions By: Amitava Chakrabarty | Updated: December 20, 2018 9:46 PM

It is advisable for your own good not to violate the rules, as the Tax Department is seeking information regarding such violations, black money or benami transactions.

The Income Tax Department has again warned people to refrain from large cash transactions.

In a bid to implement the government’s mission to make India a cashless or less cash country and weed out corruption, the Income Tax Department has again warned people to refrain from large cash transactions, contravention of which may result in the levy of penalty or disallowance of tax deductions.

Following are the five transactions that Income Tax Department doesn’t want you to do.

     Don’t accept cash of Rs 2,00,000 or more in aggregate from a single person in a day or for one or more transactions relating to one event or occasion. Instead of cash, you are advised to use an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account for such transactions. However, the said restriction shall not apply to government, any banking company, post office savings bank, co-operative bank or a person notified by the Central Government. Section 271DA of the Income Tax Act provides for levy of penalty on a person who receives a sum in contravention of the provisions of section 269ST. The penalty shall be equal to the amount of such receipt. However, the penalty shall not be levied if the person proves that there were good and sufficient reasons for such contravention.
    Don’t receive or repay specified sum exceeding Rs 20,000 or more in cash for transfer of immovable property and use account payee cheque or account payee demand draft or use of electricity clearing system through a bank account. “Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place. Contravention of the provisions of section 269SS will attract penalty under section 271D. Penalty under section 271D shall be levied of an amount equal to loan or deposit taken or accepted.
    Don’t pay more than Rs 10,000 in cash relating to expenditure of business/profession. If such expenses exceeding Rs 10,000 are made in any mode, other than by an account payee cheque drawn on a bank, or account payee bank draft, or use of electronic clearing system through a bank account, no deduction shall be allowed in respect of such expenditure in the profit and loss account.
    Don’t donate in excess of Rs 2,000 in cash to a registered trust or political party. Not only you won’t be able to claim deductions under section 80G of the Income Tax Act for such donations, but appropriate actions would be initiated against the trust or political party for encouraging money laundering.
    Don’t pay health insurance premiums in cash. If you make any payment in cash on account of premium on health insurance facilities, you won’t get deductions under Section 80D of the Income Tax Act.

So, it is advisable for your own good not to violate the above rules, as the Income Tax Department is seeking information regarding such violations, black money or benami transactions.

Rakesh Bandal (Self Employed and Agriculture) (1349 Points)
Replied 21 December 2018

only solution to your situation seems to be ' revision of sale deed of property'

as all transactions have already done away, and to minimise the effects rectify your transaction

Joe Rathinam (13 Points)
Replied 22 December 2018

Thanks Rakesh. I shall inform to try to revise the sale deed property accordingly with full sale value by paying additional stamp duty of registration. But afraid if the buyer shall get back the cash amount Rs. 34 laksh and pay the same by DD.