What is the tax liability on sale of residential property built on an encroached plot/land
saju sathyadevan
(Querist) 10 May 2014
This query is : Resolved
Sir,
My client has encroached a plot coming under the municipality for which he is paying property tax. He built a house in the year 2001. Now he wants to sell it at 20.00 lakhs. What is the tax implication in the said amount. Will it attract capital gain tax. Also, While calculating capital gain whether I have to calculate indexed cost of acquisition.
Kindly suggest me accordingly.
Sankaranarayanan
(Expert) 10 May 2014
You said it is encroached property , Then how it passable to make sale deed? Without proper details how the Sub Register office will register it?
Rajendra K Goyal
(Expert) 10 May 2014
If this is encroached property, your client can be booked for cheating and fraud even after wards.
capital gains tax has to be paid and is not concerned with the defect in title of the property.
saju sathyadevan
(Querist) 11 May 2014
Sir, here the question is not property/building but the money received, as the sale is being made without any statutory documents because he is not the owner of the property/building. He is just allowing to encroach the same to another person for Rs. 20.00 lacs. The problem is - when he get 20.00 lacs, he cannot keep it at home. But when the same is deposited in bank, the question arises about the source of money. Without proper answer, the taxman (if come under scrutiny)may charge 30% and penalty. So what should be done to legalise the money and put the things in proper manner. Also, I don't think my client is cheating or making any fraud. Its a transaction with mutual consent and knowledge.
R.V.RAO
(Expert) 12 May 2014
allowing somebody to encroach, knowing fully well that legally valid title deeds are not available ,makes your client liable for action for abetting to an unlawful activity.
