HOW TO DO PROPERTY TRANSACTIONS TO AVOID INCOME TAX NOTICES

Investing in real estate can be a lucrative endeavor, but it comes with its own set of challenges, especially when it comes to tax implications. As property transactions are closely scrutinized by tax authorities, it's crucial to approach deals with caution and awareness. In this blog post, we'll discuss key points to keep in mind while engaging in any property deal to avoid unwelcome income tax notices and ensure a smooth financial journey. Points To Be Kept In Mind While Doing Any Property Deal To Avoid Income Tax Notices.

AS BUYER

a) Deduction of TDS under section 194IA

If buyer purchases property who’s agreed Sale Consideration is 50 lakhs and above, then buyer is required to deduct TDS @1% and pay the balance amount to seller. It is to be noted that TDS is required to be deducted on value of sale consideration and not Stamp Duty Value of property. TDS is required to be deducted at the time of giving advance for purchase of property also.

It is not required to be deducted on purchase of agricultural land or if taxpayer purchases property from NRI. After deduction of TDS buyer has deposit the amount deducted into account of Central Govt. and file Form 26QB. The amount deducted shall be reflected in Form 26AS of Seller on the basis of which seller can claim TDS deducted.

b) Buyer has reported the income on his/her tax return

The property registrar must have to reveal any investment or sale of immovable property for an amount of INR 30 lakh or more to the tax authorities. The property buy/sale transaction should be reported on your Form No. 26AS. In case, you are purchasing or selling property for more than INR 30 lakhs, then also you are on the Income- Tax Department’s radar. The Income Tax Department may examine whether the buyer has reported the income on his/her tax return .

c) Income in hands of Buyer

If buyer purchases property below guideline value then difference between guideline value and purchase price shall be taxable under the head income from other sources u/s 56(2)(x) in hands of buyer. Relaxation of 10% or Rs. 50,000/- whichever is higher is given.

Property Guideline value is the estimated market value of the property as per the records maintained by the Government. Under ideal conditions, the property guideline value should reflect the true market value of the property.

AS SELLER

a) Property sold in Income Tax Return

Seller need to disclose property sold at the time of filing of return of that Financial Year. Property Sale must be reported even if capital loss were there also whether it’s taxable or not (in case of agriculture land it’s not taxable).

b) Payment/accept sale consideration in cash

There is restriction on taking/paying cash on sale/purchase of immovable property. If any person takes/pays cash of Rs. 20,000/- or more on sale of immovable property as an advance or as sale consideration, then penalty equal to cash accepted on sale shall be levied.

c) Capital Gain if any

Seller need to calculate capital gain at the time or after the sale of property so that Tax Planning if any can be done in the same financial year to save taxes.

For more details, Please watch our video

Disclaimer: Although all provisions, notifications and updates, are analyzed in-depth by our team before writing to the public. Any change in detail or information other than fact must be considered a human error. The Guide, Articles, Blogs, FAQ and videos is to provide updated information. Tax matters are always subject to frequent changes hence advisory is only for the benefit of the general public. Hence neither TaxSmooth nor any of its Team members is liable for any consequence that arises on the basis of these write-ups.

CHETNAA GOYAL

FCA, B.COM, More than 10 years of Experience in Direct Tax

How to Avoid Income Tax Notices while Doing Property Transaction