I am purchasing an office at Nagpur in a main area. It's government valuation is Rs 47 lacs. But the owner is selling me at rs 18 lacs only. Legal matters, title everything cleared. Query is will income tax authorities harass me. Will the difference be added to my income? What is the solution. I don't want to pay him higher price than agreed.
Yes sir the income tax department can ask you to deposit tax on such difference amount by showing it as your income u/s 56 as the same is contained u/s 56 of the Income tax act.
You dont pay him higher but you need to pay tax and show difference amount as your income u/s 56 and later when you sale such property you can claim 47 lakh as its cost.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
Hello,
As per Sec. 56 of the Income Tax law, any sum of money or property received by an individual from any person (except relatives) shall be taxable under the head ‘Income from other sources’: If immovable property is received for consideration which is less than the stamp duty value(Government Value) of the property by higher of following amount the difference is chargeable to tax:
(i) the amount of Rs. 50,000
(ii) the amount equal to 5% of the consideration.
Since the difference between the consideration and the Government Value is more than 5% of the consideration, the difference would be added to your income as income from other sources and be taxable. The seller would also be required to pay tax considering the government value as the full value of consideration.
You can pay the agreed price and declare the difference as your income and pay due tax on it.
I hope that this answer satisfies your requirements.
Regards,
CA Hunny Badlani
Hello Sir,
Yes, you will have to pay the taxes on difference amount.
You are not required to pay the taxes on him.
You need to show the same as your income u/s 56 and pay the applicable taxes.
Hi
Yee, income tax authorities are likely to challange you for such a low price. They will treat the differential amount as gift and demand a tax on that.
similarly, there would be probelms to seller as well.
What are the commercial reasons for such a huge difference?
Dear Sir,
Here is my reply to your query:
There will be no such additional tax liability on your part in this case. There will be additional tax liability on the seller on the amount Rs. (47 Lacs- 18lacs) as per the income tax act.
But will not be liable for any such additional tax implications.
Thanks and Regards
Divya Chugh
Hi,
Yes, difference income will be treated as your income as income from other sources.
In Budget 2016, there is a new provision ie section 56(2)(x) where if the buyer purchases a propery for a price below circle rate and the difference in the purchases price and cicrcle rate is more than Rs.50,000/- such difference would be treated as income of the purchaser.
The above means, that you may make payments for the property at lower value, but there would be additional tax implications for the buyer and seller.
You will have to pay tax on the difference between purchase price and Stamp duty value in your tax return. Also, the seller will have to compute capital gains on the stamp duty value. These are provisions of law to curb black money circulation in real estate sector.
