My mother had purchased a piece of land for 8 lakhs 12 years back. Now She is selling it for 33 lakhs to buy a flat. The circle rate of the piece of land is 17 lakhs. As the registration will be done at the circle rate of ₹17 lakh to avoid payment of excess stamp duty, how should we take the balance amount? Can we take it in cash or through online transaction? How can she save maximum tax for this transaction? Will my mother have to file her ITR for this transaction?
I would advise you to execute the sale deed at the actual value of the transaction and offer to pay differential amount of stamp duty to the buyer. If you accept the difference in cash and wish to use it subsequently for any official purpose, your mother will have to explain the source of the cash. Even if you accept the money online, you will still have to explain the nature of the transaction in respect of online money received by your mother. Since your mother will not be able to explain the source of the money, she may have to pay tax at flat rate of 60% with penalty in bonus.
Since the plot of land has been held by your mother for more than 24 months, the profits will be treated as long term capital gains and as your mother intends to invest the sale proceeds of the plot land for buying a residential house she can claim exemption under section 54F in respect of such long term capital gains subject to fulfilment of other conditions prescribed.
Please note that the residential property is required to by bought within a period of two years from the date of sale of the plot. If she intends to go for self-construction or book an under construction property, the construction has to be completed within three years. In case the full money is not utilised by the due date of filing of ITR, the unutilised money has to be deposited in a bank account under the Capital Gains Account Scheme which money can be used for the purpose of buying the property within the prescribed time period.
As per the provision of income tax laws a person is required to file his ITR if his total income before any deduction and exemption under Section 54F exceeds the basic amount of exemption, your mother will have to file her ITR even if she does not have any tax liability due to exemption available under Section 54F.
Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and on @jainbalwant on Twitter.
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Updated: 28 Nov 2023, 08:56 AM IST