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Tax on CG

Krishanu Majumder (Accountant) (174 Points)

05 January 2022

My friend bought a house let suppose for Rs 6 lakh. He will sell it after 5 years let suppose for Rs 10 lakh. His profit is 4 lakh. (Ignoring C.I for simplification). He's ready to pay CG tax.

But We want the sell proceeds to receive 5 lakh in his account and 5 lakh in my account. I am ready to pay tax on it.

What will be the tax treatment and how to show it in both of our accounts.
pls guide.

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4 Replies

CA Raj Doshi (Practising CA) (8898 Points)
Replied 06 January 2022

A is the seller of the property so buyer will pay only to A. Even if the buyer agrees to pay 5L to A and balance 5L to A's friend, it will still be considered as full income earned by A and then utilised and given to A's friend. it is called application of income. Generally, such payment by A to his friend directly or indirectly will be taxed in the hands of A's friend as a Gift from Non-Relative taxable under the head Income from Other Sources. Unfortunately, A will pay tax on 4 lakhs and A's friend will pay tax on 5 lakhs.