Akbar (Fictional Character): Birbal, What is Property or Immovable Property?
Birbal (Fictional Character): Badshah Salamat, Immovable property is aPlot, House Property, Flat, Bunglow, Shop, any land or building etc.
Akbar: Birbal, nowadays everyone talks about “Black Money, Black Money”. What is “Black Money”? Whether money is Black in Colour??
Birbal: Hahahaha!!!! Badshah Salamat, nothing like that. Money is not black in colour. In simple language, Black money is a money on which tax has not been paid by persons who are earning such money and income tax returns have also not been filed by them disclosing the nature of such money.
Akbar: Birbal, as you know that black money is used in the transactions of immovable properties widely. To restrict the use of Black Money in these transactions, Income Tax Department has introduced the new provision, what is that?
Birbal: Badshah Salamat, Indian Government is initiating various ways to control Black Money. “Black Money Bill” has been passed in both Lok Sabha&Rajya Sabha. In this Bill, very strict punishment has been 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. This provision will be having a long lasting impact on real estate market of India.
Akbar: Birbal, What are the amendments made in section 269SS of Income Tax Act?
Birbal: Badshah Salamat, According to section 269SS of Income Tax Act, while selling Immovable Property, 100% penalty will be levied if seller has accepted an amount of Rs. 20,000 or morein cash from the buyer. For example, if for selling an immovable property “Aakash” has received an amount of Rs.1 lakh in cash from “Bablu” then “Aakash” 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 battle for the property sellers. Now it will be difficult to carry on such transaction in cash.
Akbar: Birbal, What are the amendments made in section 269T of Income Tax Act?
Birbal: Badshah Salamat, 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. For example, 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.
Akbar: Birbal, to which Persons are the above Penal Provisions not applicable?
Birbal: Badshah Salamat, penal provisionsare not applicable to
2) Any Bank
3) Government Company
4) Any other person as notified by the Central Government
5) Buyer & Seller both are Farmers having only Agricultural Income
Akbar: Birbal, What will be the effect of these tax provisions?
Birbal: Badshah Salamat, 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 case 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.
Akbar: Birbal, What should the Taxpayer learn from above?
Birbal: Badshah Salamat, 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 control black money. One should be mature while making Cash Transactions otherwise the Government will levy Penalties. These are very strict provisions but these are also other ways out to reduce Black Money or to reduce Tax Evasion.
[The writer, Manzoorhasan Shaikh, is a Chartered Accountant practicing in Mumbai & Nashik. He can be contacted at email@example.com]