To buy a house ? You are not legally allowed to pay more than Rs 20,000 in cash for this

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NEW DELHI: If you made a payment of more than Rs 20,000 in cash when buying a property, be prepared for an income tax notice. In order to curb the generation of black money through cash transactions in real estate transactions, Section 269SS of the Income Tax Act made some changes to the real estate industry in 2015.
According to the tax law formulated by the Central Commission for Direct Taxes (CBDT), in force since June 1, 2015, any real estate transaction, including agricultural land, must be carried out by beneficiary account check or real-time gross settlement (RTGS). ) or electronic funds transfer if the amount is Rs 20,000 or more. If the cash transaction is made over the limit, a penalty of an equal amount under Section 271 D of the Income Tax Act will be imposed on the seller who agrees that the cash or repayment of the advance is made in cash by the seller of the property.
“For example, if for selling a property “A” received an amount of Rs.1 lakh in cash from “B”, then “A” has to pay a 100% penalty of Rs. 1 lakh. This means that the cash transaction should be done with care when selling land, house, apartment, shop etc. Generally in rural areas cash transactions are done in the property , because buyers are not considered trustworthy. NSF check issues etc. create legal hassles for sellers of goods. Now it will be difficult to conduct such transaction in cash,” says CA Umesh Sharma .
Moreover, according to Section 269T of the Income Tax Act, a penalty of 100% is levied when refunding the amount received for transfer of immovable property in cash for Rs 20,000 or more. For example, if a real estate transaction is cancelled, a penalty of 100% will be levied when refunding the amount received if the amount of Rs 20,000 or more is paid in cash. Thus, wherever the advance on the property is refunded, in the event of cancellation of the transaction, this should only be done by check.
However, farmers who sell agricultural land there will not be covered by this section only if they have no other taxable income.
Another important factor to keep in mind is that transactions for real estate worth Rs 30 lakh or more must be reported to tax authorities.
“This real estate transaction must be declared in Form No. 26 AS and Form 61A which is a declaration for specified financial transactions. The purchase/sale of real estate above Rs 30 Lakhs is considered as a transaction of large value and these transactions must be reported. Tax authorities can examine by means of this information whether the person declared the income in his tax return. Tax authorities monitor these transactions and if they are not declared and the tax authorities find anomalies, action may be taken by the authorities against such an individual,” said Aditya Chopra, Managing Partner, Victoriam Legalis – Advocates & Solicitors.
In order to crack down on black money and discourage cash transactions, the RBI notifications not only lay down KYC requirements but also compel banks to report cash transactions over Rs 10 lakh to their supervising offices.
“Furthermore, any cash transaction of Rs 50,000 requires the declaration of PAN. The Income Tax Act provides support in this endeavor and to combat tax evasion through provisions such as Article 269 ​​SS, which prohibits cash transactions of more than Rs 20,000 for cash loans or deposits.Furthermore, Section 269 ST, prohibits any person from receiving in cash a sum of INR 2 lacs or more, other than by a single person’s check, draft or wire transfer in a single day or in respect of a single transaction or a single single person event or occasion,” said Jyotika Jain, Partner, Miglani Varma & Co – attorneys, lawyers and consultants.
So before you get tempted with partial cash payments to a builder, beware of tax penalties. In a survey conducted by community platform LocalCircles in 2021, 70% of respondents said they had paid part of the total payment for a real estate transaction in cash in the past seven years. About 16% of respondents said they paid more than half the amount in cash.
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