Property sale agreement & sale deed amount & taxation
shrikant
(Querist) 04 November 2015
This query is : Resolved
Hello Experts,
I have an Old property [an flat in an apartment]. Have got a buyer & has been agreed for a price of Rs.45 lakhs - full actual value, same will be in the Sale deed.
Now, due to enhance the loan eligibility, the buyer/ his banker is asking for a Sale Agreement amount of Rs.55/-lakhs.
If I do that -
1. Will there be any future Tax liability for the difference 10 lakhs?
2. What precautions should I take?
3. If this is not the correct thing, what should I suggest the buyer/his banker?
Many thanks in advance.
Best Regards,
Shrikant
Anirudh
(Expert) 04 November 2015
It is a great TRAP. Better Beware.
You say, you have no difficulty in enhancing the value, provided you get the enhanced price i.e. Rs. 55 lakhs.
If you only get 45 lakhs but show in the Sale Deed Rs. 55 lakhs then the following are the implications.
1. In the Sale Deed you will show that you received Rs. 45 lakhs by means of cheque and the balance Rs. 10 lakhs by way of CASH. (Do you agree to do this?)
2. The buyer will deduct 1% TDS i.e. 55000/- and remit it to the Income Tax Department quoting your PAN No.
3. When you file your income tax returns, you will be able to adjust the Rs. 55000/- TDS already effected by the buyer.
4. You have to pay Capital Gains tax after taking into account the sale price as Rs. 55 lakhs and not the sale consideration which you actually received i.e. 45 lakhs. This will mean that you have to pay Rs. 2 lakhs (being 20% Long term capital gain tax on Rs. 10 lakhs i.e. the difference between Rs. 55 lakhs and 45 lakhs).
YOU NEED NOT SUGGEST ANYTHING EITHER TO THE BUYER OR HIS BANKER.
You have to simply say that unless I get the enhanced consideration, I will not agree for the enhanced consideration only to help the buyer. If the buyer is really interested in buying your property, he will find his way as to how to get the funds.
shrikant
(Querist) 04 November 2015
Hello Sir,
Thanks for your quick response. Here are few clarifications please -
1. Request is for the Sale Agreement as Rs.55 Lakhs.
2. Sale Deed will be the actual full sale value of Rs.45 lakhs only.
3. No Black & white portion involved here in the transaction.
ThanQ
Anirudh
(Expert) 04 November 2015
Your understanding is quite wrong.
The Bank will not agree unless the SALE DEED also indicates the sale consideration as Rs. 55 lakhs.
The Bank will be releasing the entire loan amount (not sale consideration) of Rs. 45 lakhs directly to you. The buyer has to show as though he paid Rs. 10 lakhs to the seller from his own funds. This he will be able to show either in cheque or cash. Since in your case, the buyer does not have that Rs. 10 lakhs, he cannot issue any separate cheque to you. He will say that he paid it through cash to you. THAT'S THE CATCH.
I HAVE GUIDED YOU. REST IS YOUR WISDOM.
shrikant
(Querist) 04 November 2015
Hi Anirudh,
What you have suggested is very sensible & highly valuable. It can create complications, for sure. Hence, will suggest him to make arrangements to finance Rs.45lakhs & Sale deed / Agreement will all be for the same amount of Rs.45 lakhs.
Thanks,
Shrikant
Rajendra K Goyal
(Expert) 04 November 2015
Agreed with the advice from expert Anirudh.
