If you’re planning to buy or sell a property, it’s crucial to understand the regulations surrounding cash transactions to avoid significant penalties and complications. The government has established strict limits on cash dealings in property transactions, and exceeding these limits can result in severe penalties and notices from the Income Tax Department.
Cash Transactions in Property Deals
Property transactions frequently involve offers to deal in cash, with parties often agreeing to such terms. However, it’s important to note the stringent regulations governing the amount of cash that can be used in these transactions.
What is the Limit for Cash Transactions?
In 2015, the government amended the Income Tax Act, introducing Sections 269SS, 269T, 271D, and 271E. According to these amendments, cash transactions in property deals are limited to ₹19,999. Exceeding this limit can trigger a notice from the Income Tax Department.
For instance, if you sell a piece of land for ₹1 lakh and accept the payment in cash, Section 269SS mandates a penalty of 100% of the transaction amount. This means you’ll be fined ₹1 lakh.
Penalty under Section 269T
If a property deal is canceled and the buyer demands a refund in cash, Section 269T stipulates that you can return up to ₹20,000 in cash. Returning an amount above this limit will attract a penalty under Section 269SS, resulting in a fine equivalent to the total amount returned.
How Will the Income Tax Department Know?
You might wonder how the Income Tax Department detects cash transactions. The answer lies in the property registration process. When you buy a property, it must be registered to legally transfer ownership. During registration, all transaction details, including cash payments, are recorded. This information is accessible to the Income Tax Department, enabling them to monitor and act on any violations.
How to Make Transactions?
For transactions exceeding ₹19,999, it’s essential to use cheques or internet banking. This rule ensures transparency and compliance with legal requirements. However, it’s important to note that this regulation does not apply to government entities, government companies, banking companies, or specific individuals and institutions designated by the central government.
Conclusion
Adhering to the cash transaction limits in property deals is not only a legal requirement but also a safeguard against hefty fines and legal issues. Ensure you are well-informed and compliant with these regulations to avoid any future regrets and ensure smooth property transactions.
