If you’re planning to buy or sell a property, it is crucial to familiarize yourself with the regulations surrounding monetary transactions.
Often, during property deals, the other party may propose cash payments, and sometimes people agree to such offers.
However, it’s important to note that cash cannot be the sole method of transaction in property deals. The government has implemented specific rules to govern these transactions.
Understanding the Cash Transaction Limit in Property Deals
Since the amendments made to sections 269SS, 269T, 271D, and 271E of the Income Tax Act in 2015, cash withdrawals exceeding Rs. 19,999 are not permitted.
Violating this limit may result in an income tax notice. The reason behind this restriction is to prevent the difficulty of discerning whether.
the cash used in transactions is obtained legally or through illicit means. These changes were implemented to combat the issue of black money.
Implications of Crossing the Cash Transaction Limit
One of the most crucial changes is seen in section 269SS, where penalties can be imposed for cash transactions. In simple terms, if an individual receives Rs.
20,000 or more in cash when selling land, a house, or any immovable property, a penalty of 100% may be levied, even if the property is agricultural land.
To clarify, if you sell your land for Rs. 1 lakh and accept the entire payment in cash, the Income Tax Department will claim the entire amount as a penalty under section 269SS of the Income Tax Act.
The Role of Section 269T in the Process
Section 269T of the Income Tax Act reinforces the saying, “Ole padna hai after shaving your head.
” If your property deal gets canceled for any reason, and the buyer demands a refund in cash, you will be subject to a penalty.
In other words, if you refund an amount of Rs. 20,000 or more in cash, the entire sum will be treated as a penalty and go to the Income Tax Department, as specified in section 269SS.
How Does the Income Tax Department Monitor Such Transactions?
You might wonder how the Income Tax Department becomes aware of cash transactions. The simple answer lies in the registration of your property.
Suppose you choose to proceed with a cash transaction and arrive for property registration. In that case, the registrar will not cancel your registration.
but they will forward all the details of your cash transaction to the Income Tax Department. After that, the responsibility lies with you.
Conducting Transactions in Compliance with the Rules
As per the Income Tax rules, cash transactions should not exceed Rs. 19,999, and this information should be included in your property registry.
It is advisable to make the remaining payment through checks or internet banking, ensuring a smoother process.
Exemptions for Selected Individuals and Institutions
It’s important to note that income tax rules may not apply to certain individuals and institutions such as government bodies, government companies, banking companies, or the central government.
