CA Umesh Sharma

CA Umesh SharmaArjuna (Fictional Character): Krishna, It is said that black money is used in the transactions of immovable properties. To restrict the use of Black Money in these transactions, Income Tax Department has introduced the new provision, what is that?

Krishna (Fictional Character): Arjuna, Government is initiating various ways to curb Black Money. A few days ago, “Black Money Bill” was passed in the Lok Sabha. In this Bill, very stringent punishment was mentioned for those who transact in Black Money. Also considering the fact that Black Money is widely used in transactions of immovable properties, Income tax Dept. has brought a penalty provision in budget 2015-16 for transactions of immovable property in Cash. For this the government has made amendments in sections 269SS, 269T, 271D and 271E of the Income Tax Act. This provision will be having a long lasting impact on real estate market of India.          

Arjuna: Krishna, What are the amendments made in section 269SS of Income Tax Act?

Krishna: Arjuna, According to section 269SS of Income Tax Act, while transacting Immovable Property, 100% penalty will be levied if seller has accepted an amount of Rs. 20,000 or more in cash from the buyer. e.g. if for selling an immovable property “A” has received an amount of Rs.1 lakh in cash from “B” then “A” has to pay 100% penalty of Rs. 1 lakh. That means, Cash Transaction should be done carefully when selling a Plot, House Property, Flat, Shop etc. Generally, in the rural areas cash transactions are done in property, as the buyers are not considered trustworthy. Issues of Cheque bounce; etc creates legal hassle for the property sellers. Now it will be difficult to carry on such transaction in cash.

Arjuna: Krishna, What are the amendments made in section 269T of Income Tax Act?

Krishna: Arjuna, According to section 269T of Income Tax Act, from 1st June, 2015 100% Penalty will be levied while repaying the amount received for Transfer of Immovable Property in cash for Rs. 20,000 or more. E.g. if any transaction of Immovable Property is cancelled then while repaying the amount received 100% penalty will be levied if the amount of Rs. 20,000 or more is paid in cash. Thus wherever property advance is repaid, in case the deal is cancelled it should be done in cheque only. Tax planning in survey will be affected in some cases.

Arjuna: Krishna, to which Persons are the above Penal Provisions not applicable?

Krishna: Arjuna, the provision of section 269SS is not applicable to the 1) Government 2) any Banking Company 3) Government Company and 4) any other person as notified by the Central Government. Also Section 269T will not be applicable while making repayment to the above mentioned persons. The section 269SS is not applicable to persons from whom the loan or deposit is taken or accepted and if the person by whom the loan or deposit is taken or accepted are both having Agricultural Income and neither of them has any Income chargeable to Tax. Thus farmers selling there agricultural land, etc will not be covered, only if they don’t have any other income chargeable to tax. It will be very hard to find such a farmer, as many may have income from Interest on FDRs, etc. Both the seller and the buyer need to be farmers. Further if immovable property is sold and amount is received in cash on the same day of sale/purchase then whether section 269 SS will be applicable or not is question? It seems that same may not be covered u/s 269SS, whereas applicability U/s 40 A 3(a) needs to be check on case to case basis.

Arjuna: Krishna, What are the penal provisions if Taxpayer has made default in following the above provisions?

Krishna: Arjuna, the Penal Provisions of section 269SS and 269T were mentioned in sections 271D and 271E. That means, 100% penalty has to be levied, if a person has taken or accepted a loan or deposit or any specified sum of money or has repaid the loan or deposit or specified sum of money of an amount of Rs. 20,000 or more in cash. The right of levying of penalty is of the department. Further the Tax Auditor has to mention details of such transactions in the Tax Audit Report.

Arjuna: Krishna, What will be the effect of the amendments of these provisions?

Krishna: Arjuna, if a businessman has incurred expenditure of more than Rs. 20,000 in cash on a single day to a single person then the said expenditure is disallowed u/s 40A 3(a) of Income Tax Act and income tax will have to be paid on it. This Provision is different. But in the provision of section 269SS and 269T, 100% penalty will have to be paid if a person has accepted or repaid an amount of Rs. 20,000 or more in cash. Also in this if many a times an amount less than Rs. 20,000 is accepted or repaid but its gross total exceeded Rs. 20,000 then it is also covered and penalty will have to be paid. This provision is going to affect the Builders and Developers as Cash Transactions were widely incurred in transaction with Immovable Properties. This Provision will also avoid those Sales Transactions that take place only on the basis of bonds i.e., unregistered documents. Further, the Taxpayer can make an appeal on the penalty levied.

Arjuna: Krishna, What should the Taxpayer learn from above?

Krishna: Arjuna, one should be careful while making Transactions in cash for an amount of Rs. 20,000 or more. The penal provisions are applicable to the seller. Various Departments of the Government are becoming very strict day by day regarding cash transactions in order to curb black money. One should be prudent while making Cash Transactions otherwise the Government will levy Penalties. These are very stringent provisions but these are also other ways out to reduce Black Money or to reduce Tax Evasion. Already the Real Estate Market is in a state of “SLASH”; If transaction is done in “CASH” then the Income Tax officer may give you a ”DASH”.

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34 responses to “Harsh Penalty for Property Transaction in Cash of Rs. 20,000 or more w.e.f. 1st June, 2015”

  1. SK Jha says:

    I think that the article is little misleading. If cash is received for generating black money then only it should qualify for penalty. In case it is received as part of declared i.e registered value of property and receipt is used to calculate applicable tax then why penalty should apply ?

  2. Azlan Khan says:

    Hi Sir,
    I want buy a property and seller need cash, what should I do? as I am salary earning person and all my saving are already reflected in my Last three years IT returns.

  3. nagaraj says:

    sir, iam construct residential building.one day expenditure for building accessories (ex)cement, paid in cash more than rs.250000. this transaction how to impact on incometax act.

  4. Purnima Bhatt says:

    Sir, If property transaction is done more than RS. 10,00,000/- in cash to our relative and it is mentioned in the sale deed after June 1st 2015, then have you any solution for us.

  5. Devender Rao says:

    If i sale a shop and the cheque of that deal bounced. Can the buyer give me the whole amount in cash?

  6. Ankush Goel says:

    IF WE RECEIVED THE CASH AGAINST IMMOVABLE PROPERTY BEFORE 31/05/2015 THEN PROVISION IS APPLICABLE

  7. sarfaraz says:

    Hi
    I want to ask , if buyer has paid the money in cash above 20k,will there will be penalty for buyer too?

  8. Krishna says:

    Sir is there any limit for payment in cash for providing services to company for purchasing agriculture produce by making them arrangement for payment to farmers on their behalf?

  9. pramod chopra says:

    agriculture land purchse in uttar pardesh in the asstt. year 2014-15 and payment made in cash Rs.47,00,000/- I want to know that how much penality on me

  10. Poornima says:

    Can someone please explain, what are the implication for buyer in this scenario? Thanks

  11. Nitin agarwal says:

    hello sir

    my client had a land in rural area(not used for agro purpose), consideration would be near 3 lakhs, buyer wants to pay in cash, my client is a businessman, would it attarct penalty, as the buyer is not trustworthy, my client doesnot want to take dd…sir please help me out that wherther to take cash or not….

    if it attaracts penalty then what are the relaxation etc available …?????

  12. pradeep kumar agarwal says:

    Sir, If property transaction is done more than ₹ 20000, if it is mentioned in the sale deed after June 1st 2015, who will be charged penalty buyer or seller?

  13. TUSHAR BOSE says:

    CAN I PURCHASE NON JUDICIAL STAMP OF RS 5 LACS BY CASH

  14. Srinivas says:

    Sir,
    If property transaction is done more than ₹ 20000, if it is mentioned in the sale deed after June 1st 2015, who will be charged penalty buyer or seller?

  15. Ca. Ratan Kumar Agarwala says:

    Section 269SS Explanation iv defines Specified Sum as any sum of money recievable, whether as advance or otherwise, in relation to transfer of an immovable property whether or not the transfer takes place. This means the key word is “Receivable” in relation to transfer of immovable property. So, in my opinion, the same would hit even the receivables after the transfer takes place because the same would come within the ambit of receivable otherwise.

  16. Santosh says:

    Sir what if we have mentioned cash transaction in the sale deed which was exected on 9th april 2015?

  17. Amit says:

    Sir, if one has received the money in installments in cash which is less than 20K per installment in selling property, is that also covered under 269SS?

  18. aravaazhi says:

    levying Tax u/s 269SS under the new provision for cash transactions of Rs.20000/- or more, will prevent black money.
    However the main problem is that in many places, Guideline value of Rural Agricultural land is far more below the market value. Say if the Guideline value is Rs 3.5 lakhs per Acre, the market value is around 50 Lakhs. The buyer insist to pay using DD, only for the Guideline value which is mentioned in the Sale deed and the desperate seller who is in need of money is forced to agree for the Black.
    Solution is that there should not be much difference between Guideline value and market value of the land.

  19. aman deep says:

    Sir,

    i purchased a plot in 2009 for 270000-00.
    250000 i arranged by selling old plot
    20000 a loan from mother.
    quesation is that i did both the transction in cash in 2009 for rs.270000-00.
    am i come under panelty act or other act going to be introduce on 1st june 2015.

    pls give exact reply,

    regard.
    Amamd deep

  20. subhash bhagat says:

    black money would not be effected from this rule all builder infra dealers are already paying cash the cost part of immovable properties almost 20% is only being shown in book the dealers would arrange to receive and repayment th. bank where is control on black money only mode of payment is restricted to pay cash more than 20000/- there is no any provision or attempt to restrict involvement of 80% of black money involved in immovable properties?

  21. Pankaj says:

    Dear Sir,

    If the transaction is done through DD, then will it be considered as Cash?

  22. Pankaj says:

    Dear Sir,

    If the transaction is done through DD, will it be considered as Cash?

  23. Naman Shah says:

    Although the provisions are meant to curb black money it should not be used in case of genuine transactions. If implemented effectively and appropriately after a considerable time the “System” of circulation of black money in real estate will stop to a certain extent.

  24. CA Rahul D says:

    Dear Mr. Rajeev, as far as payment of lease and stamp duty is concerned the same is paid to the government…. And since payment is made to the government, section 269SS & T will have no implications on such transactions…

  25. CA Subhendu Basu says:

    This matter of levying Tax u/s 269SS under the new provision for cash transactions of Rs.20000/- or more, will cause immense harrasment to the public at large.The Housing sector is going to get a big blow.Our country with such a huge population, has not been able widen n extend the banking services to the masses.Percentage of educated class is much below the required level.If we start thinking in the line developed nationds, the entire economy will collapse.The infrastructure industry has aleady been suffering and now in its worst form.The people engaged with this,will loose their livelihoods and so on.Policy makers should give a second thought before this rule is brought under compulsion.

  26. S Ravisankar says:

    Arjuna :: Whether this rule is applicable to all citizens of the nation equally ?

    Krishna :: Arjuna, let us keep ourselves to what the rule says and not to how it would be interpreted by various classes. Of course, India is India and VVIP culture is the only culture left in the nation as of now. If we go into this further, I would have to tell the last slokas of Geetha again !!!

  27. CA Umesh Sharma says:

    Dear Rajiv,

    1. Section 269 SS is for accepting loan or deposit or any specified sum and Section 269 T is for repayment of the loan or deposit or specified sum so question of lease and stamp duty payment does not arise.

    2. Further Government can accept the sum in cash as section 269 SS and 269 T does not apply to them.

  28. Ram Bodke says:

    Dear Sir,
    This may be for the transaction for the peoples other than farmers. Farmers are doing only cash transactions either they sell their corps and or they buy any thing including farm land in the market. Even they buy farm lands also in cash and most of the farmers as on today also not having Bank accounts and don’t know formalities for banking transactions. As on today also you can see in all APMC market farmers are getting cash only also they sells their corps directly in cash from. Hence please clarify whether farmers are exempted from such a rule of their farm place and they don’t have time to go to Bank in city waste time and make loss of their own unnecessary or our Govt. want farmers to leave their work and go in que for Bank transactios. Regards

  29. Reshma says:

    Mr. Umesh Sharma,

    Could you please help me with the material to state that the provisions of Section 269SS and 269T is not applicable in case where the sale consideration is received on the date of registration.

    Thanks in advance

  30. Rajiv says:

    You will penalize for paying or accepting more than 20,000/- as cash. what about the lease and stamp duty paid in lakhs in cash?
    This is not rule to follows, but rule to make you scapegoat.

  31. yashdeep kothari says:

    but sir,if we apply interpretation rules to the wordings in the section following weakness emerges as per my humble opinion:
    words used are ‘advance or otherwise’ so by applying the principles,if any sum of money is paid in cash after registration of transfer deed than it would be in the nature of sales consideration and would not come in the category of advance or other transactions in the nature of advance.Sale consideration and advance are 2 different things with different legal meanings.

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