Capital Gains - Cost of Improvement - Professionals - Taxation - TIK Share
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Capital Gains - Cost of Improvement


Rakesh Bharadwaj

2015-03-06

Dear Experts, I have some doubts on real estate transaction.

Assume there was an Agreement to sell a house property for 25 lakhs. The Property has been finally registered for 23 lakhs. However, the consideration totally paid by the buyer was 31 lakhs which was completelt through cheque and NEFT. Now following are my doubts

1. Whether the sale deed can be registered for a value lesser than that specified in Agreement

2. The Excess consideration of Rs 8 lakhs (ie. 31-23) should have been recieved by cash but was taken through banking channel by mistake. What are the legal implications of this transaction ? 

3. What are the remedies do you suggest. 

I know this transaction would not be an acceptable one and also quite difficult to defend  at the time of assessment. Kindly let me know your opinions.

Rahul Rai

2015-03-07

Mr. Rakesh Bhardwaj your doubt is not different from almost everyone buying or selling properties. Real estate transactions are really costly. First, the cost of estate is very high and on that the tax costs are almost 40% of estate cost.

First we have to pay for registration, legal consultants and on all these Income Tax.

The cost of real estate transactions in India is too high.

Now lets discuss your doubt. You said that property was valued at 25 lakhs as per sale deed. Registration had to be done at 25 lakhs only. May be there are some clause where registration costs are split or included in value.

Second you said that instead of 25 lakhs, buyer paid 31 lakhs (including 8 lakhs which were supposed to be paid in cash). Well, the amount which was supposed to be paid in cash was black money or will be considered as black money.

This is how 99% real estate transactions are done in this country. No wonder your client did was different.

I would advice you to tell your client that lets include the 8 lakhs also as sale consideration and pay the capital gain taxes.

It is not advisable in current scenerios where government is very strict on black money and new laws are discussed to bring criminal laws and prosicution.

Real estate transaction are always in eye of tax departments and it is very difficult to come out once caught.

Second scenerio could be that 8 lakhs were paid by mistake, but you told that these were supposed to be paid in cash. Since court and law require proofs, you can say that these 8 lakhs were paid by mistake. Ask your client to return the amount and calculate ccapital gain accordingly.

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