Penalty for Property Transaction in Cash of Rs. 20,000 or more w.e.f. 1st June, 2015

Penalty for Property Transaction in Cash of Rs. 20,000 or more w.e.f. 1st June, 2015 

Q : How the government restricted the use of Black Money in Property transactions, by Income tax Act ?

Income tax Dept. has brought a penalty provision in budget 2015-16 for transactions of immovable property in Cash. For this the government has made amendments in sections 269SS, 269T, 271D and 271E of the Income Tax Act. 

Q What are the amendments made in section 269SS of Income Tax Act?

According to section 269SS of Income Tax Act, while transacting Immovable Property, 100% penalty will be levied if seller has accepted an amount of Rs. 20,000 or more in cash from the buyer. e.g. if for selling an immovable property “A” has received an amount of Rs.1 lakh in cash from “B” then “A” has to pay 100% penalty of Rs. 1 lakh. That means, Cash Transaction should be done carefully when selling a Plot, House Property, Flat, Shop etc. 

Q What are the amendments made in section 269T of Income Tax Act?

According to section 269T of Income Tax Act, from 1^st June, 2015 100% Penalty will be levied while repaying the amount received for Transfer of Immovable Property in cash for Rs. 20,000 or more. E.g. if any transaction of Immovable Property is cancelled then while repaying the amount received 100% penalty will be levied if the amount of Rs. 20,000 or more is paid in cash. Thus wherever property advance is repaid, in case the deal is cancelled it should be done in cheque only.

Q: To which Persons are the above Penal Provisions not applicable?

The provision of section 269SS is not applicable to the 

1) Government 

2) any Banking Company 

3) Government Company and 

4) any other person as notified by the Central Government.

Also Section 269T will not be applicable while making repayment to the above mentioned persons. 

The section 269SS is not applicable to persons from whom the loan or deposit is taken or accepted and if the person by whom the loan or deposit is taken or accepted are both having Agricultural Income and neither of them has any Income chargeable to Tax. 

Thus farmers selling there agricultural land, etc will not be covered, only if they don’t have any other income chargeable to tax. It will be very hard to find such a farmer, as many may have income from Interest on FDRs, etc.

Both the seller and the buyer need to be farmers. 

Q What are the penal provisions if Taxpayer has made default in following the above provisions?

The Penal Provisions of section 269SS and 269T were mentioned in sections 271D and 271E. That means, 100% penalty has to be levied, if a person has taken or accepted a loan or deposit or any specified sum of money or has repaid the loan or deposit or specified sum of money of an amount of Rs. 20,000 or more in cash. The right of levying of penalty is of the department. Further the Tax Auditor has to mention details of such transactions in the Tax Audit Report.

Q What will be the effect of the amendments of these provisions?

If a businessman has incurred expenditure of more than Rs. 20,000 in cash on a single day to a single person then the said expenditure is disallowed u/s 40A 3(a) of Income Tax Act and income tax will have to be paid on it. This Provision is different. 

But in the provision of section 269SS and 269T, 100% penalty will have to be paid if a person has accepted or repaid an amount of Rs. 20,000 or more in cash. Also in this if many a times an amount less than Rs. 20,000 is accepted or repaid but its gross total exceeded Rs. 20,000 then it is also covered and penalty will have to be paid. This provision is going to affect the Builders and Developers as Cash Transactions were widely incurred in transaction with Immovable Properties. This Provision will also avoid those Sales Transactions that take place only on the basis of bonds i.e., unregistered documents. Further, the Taxpayer can make an appeal on the penalty levied.

Q What should the Taxpayer learn from above?

one should be careful while making Transactions in cash for an amount of Rs. 20,000 or more. The penal provisions are applicable to the seller. Various Departments of the Government are becoming very strict day by day regarding cash transactions in order to curb black money. One should be prudent while making Cash Transactions otherwise the Government will levy Penalties.