• Amenities cost - capital gain or not

Hi,

I’m selling my residential property for 48 lakhs. The buyer has applied for loan from the bank and they have suggested the following:

1. Execute a sale agreement for 30,50,000 which is the current market value as per the govt rate.

2. Execuite a amenities agreement for 17,50,000 and show it as an improve cost.

I don’t have issues with the sale agreement. However, the amenities agreement says that I have spent 17,50,000 as per the request of the buyer and the buyer will provide me that said money by way of additional bank loan under “market funding” plan.

My question is, whether the 17,50,000 will be considered as a taxable income or a capital gain.
Asked 2 months ago in Capital Gains Tax from Hyderabad, Telangana

Hi,

It will be considered as capital gain.

Karishma Chhajer
CA, Jodhpur
637 Answers
3 Consultations

5.0 on 5.0

So for what have you spent that money?

What amenities have you provided to the buyer?

If you haven't provided any capital asset then it's not your capital gain income and hence it will be charged at normal rates of tax.

Which can be more harmful because you need to show the bills of amenities if you have given him any otherwise you will pay tax on full 1750000 which will take you to 30% tax slab. It is better to show it as capital gain income and pay 20% on all amount and don't worry about any proof.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
574 Answers
5 Consultations

5.0 on 5.0

Hi

It is advisable to consider it under capital gain.

Swati Agrawal
CA, Indore
698 Answers
1 Consultation

5.0 on 5.0

It is advisable to show it as a capital gain and pay the taxes on the same.

Nikhil Khanna
CA, Mumbai
1428 Answers
19 Consultations

4.8 on 5.0

Dear Sir,

Hope you are doing well !

From tax point of view, show it as a capital gain.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
1109 Answers
8 Consultations

4.8 on 5.0

Hi

You may have a separate agreement for furniture and fixtures. It cannot be called as amenities. Such separate sale of furniture and fixtures shall not be liable to capital gain.

However, make sure you have enough costs to prove 17.5 lacs as cost of such furniture and fixtures.

Lakshita Bhandari
CA, Mumbai
2254 Answers
81 Consultations

5.0 on 5.0

Hi,

- It should be treated as Sales consideration for capital gain but the question is how you will proove cost of 17.50 lacs?

Thanks

Vivek Kumar Arora
CA, Delhi
1724 Answers
52 Consultations

5.0 on 5.0

This is likely to be a matter of analysis from the view point of tax authorities.

Practically, if the officer try to analyse the transaction and request you to prove the expenses incurred towards amenities would you be able to substantiate the expenses by way of bank entries and invoices ?

In my view, though the agreement say otherwise, the entire agreement is for sale of house and it should be treated as sale price in your hand.

Also in case after some years if the buyer intend to sale that property, he would show it as the cost of house and claim the tax.

For you the incidence of tax is by way of capital gain, making separate agreement does not change the scene.

Do note that different experts may have differing views in this matter.

Jasmina Jain Shah
CA, Greater Mumbai
105 Answers
1 Consultation

5.0 on 5.0

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