Measures to curb black money have been on the lips of every Finance Minister and Honorable Minister Shri Arun Jaitley is no exception.

As we know, Real Estate business is the largest contributor of black money transactions. He trusts on the JAM (Jandhan, Aadhar, Mobile) generation to move away from such dark deals and build an inclusive transparent economy.

This apart, on the direct taxes front in real estate dealings he proposes amendments, with effect from 1st day of June, 2015, which raises our concern. The following is an extract from the Finance Bill, 2015.

‘The existing provisions contained in section 269SS of the Income-tax Act provide that no person shall take from any person any loan or deposit otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, if the amount of such loan or deposit is twenty thousand rupees or more. However, certain exceptions have been provided in the section. Similarly, the existing provisions contained in section 269T of the Income-tax Act provide that any loan or deposit shall not be repaid, otherwise than by an account payee cheque or account payee bank draft or online transfer through a bank account, by the persons specified in the section if the amount of loan or deposit is twenty thousand rupees or more’.

‘In order to curb generation of black money by way of dealings in cash in immovable property transactions it is proposed to amend section 269SS, of the Income-tax Act so as to provide that no person shall accept from any person any loan or deposit or any sum of money, whether as advance or otherwise, in relation to transfer of an immovable property otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount of such loan or deposit or such specified sum is twenty thousand rupees or more’.

‘It is also proposed to amend section 269T of the Income-tax Act so as to provide that no person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than by an account payee cheque or account payee bank draft or by electronic clearing system through a bank account, if the amount or aggregate amount of loans or deposits or specified advances is twenty thousand rupees or more. The specified advance shall mean any sum of money in the nature of an advance, by whatever name called, in relation to transfer of an immovable property whether or not the transfer takes place’.

It is also proposed to amend section 271D and 271E of the Income-tax Act to provide that if a person accepts any loan or deposit or specified sum referred to in section 269SS or if a person repays any loan or deposit or specified advance referred to in section 269T, in contravention of the provisions of those sections, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit or specified sum so accepted or repaid, as the case may be.  Read- Advance in cash for Property to be Covered by Section 269SS & 269T 

The crux of the amendments is in adding and defining the terms ‘specified sum’ to Section 269SS and ‘specified advance’ to Section 269T.  

“Specified sum” means any sum of money receivable, whether as advance or otherwise, in relation to transfer of an immovable property, whether or not the transfer takes place.

“Specified advance” means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not the transfer takes place.

Our first concern is what ‘advance or otherwise’ means.  What if the entire amount is given in cash on the date of registration, carrying out the deal through a document in Stamp paper? No advance. Does it attract the mischief of ‘otherwise’?

The existing Section 269SS provides further that the provisions of this section shall not apply to any loan or deposit or specified sum, where the person from whom the loan or deposit or specified sum is taken or accepted and the person by whom the loan or deposit or specified sum is taken or accepted, are both having agricultural income and neither of them has any income chargeable to tax under this Act.

Mahatma Gandhi asked us to consider the case of the poorest villager when we are planning to do something. Let us agree that in spite of our best efforts, in rural areas, banking is not yet popular and people are illiterate, not to speak about e-literacy.

How does the seller ensure the buyer is not an assessee? The Income Tax Department no longer issues certificates that someone is not an assessee.

Dear, even a person raising cattle, single or otherwise, and a person with income in the nature of interest on deposit is having income chargeable to tax! The question of deduction or taxable limit applies only thereafter.

Likewise, can someone accept an advance in cash on a Bank holiday?

It should be lauded that the drive to reach banking to villages is hitting first gear at last and post office banking might also help in this. Further, the intelligent Minister’s resolve to discourage cash based transactions and incentivize card based transactions augurs well.

Black money is a menace and activities like clearing up unexplained credits as advance for immovable property will be restrained. Proposed coins with the near status of legal tender might eventually replace the current 50% black deals in urban real estate and may be a clear winner for both sides.

But who will bring to the Minister, the concerns of our poor villagers in need of selling immovable property?

Author- CA Lukose Joseph, CA Anil P Nair

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0 responses to “‘JAM’ming currency in Real Estate, Jaitley overlooks villagers?”

  1. Sojan says:

    S.Prakash says that unless and until the SR value of land is brought on par
    with market value of land, any legislation introduced to curb black money
    in Real estate business will be less effective.

  2. S PRAKASH says:

    The amount of block money generated in the real estate can be reduced only when the SR value and Market Value is same.This is my own experience. Recently an agricultural land was sold for Rs.35,00,000/- where as the same was registered for only Rs.3,50,000/- as per the SR Value. There are hundred of such examples specially in TUMKUR. how do you control them?. Hence the MARKET VALUE SHOULD BE THE SR VALUE. One more such example is that the agricultural land is taken by the developers on Power of Attorney and after conversion the same is sold at very high margin,but the land owner mostly the agriculturists will not get even 1/3 of the sale price. Even in acquisition cases the land will be purchased by the influenced persons before the same is acquired and get hand some compensation of white money.Ultimately the poor land owner is hit hard.Keeping in all these practical issues the sections of the Income Tax Act should be amended to suite all these type of transactions.

  3. HARSHADRAI says:

    BLACK MONEY IN REAL ESTATE. SOLUTION. IN THIS RESPECT I HAVE SEND MY SUBMISSION TO MANNIYA P.M.,F.M. ETC. BLACK MONEY PASS ON BEFORE AGREEMENT.SELLER RECD, BLACK MONEY THEREAFTER HE ENTERED IN TO AGREEMENT.

  4. P Aravindhan says:

    The argument is not tenable, after almost 50 years of Public Sector Banking in nooks and corners of our country.

    We have to make a beginning some time. Perhaps this is the best time.

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