If you are considering buying or selling a property, this information is crucial for you. Before finalizing any property deal, you must be aware of the rules related to cash transactions to avoid any future regrets.
Cash Transactions in Property Deals
Often, property transactions involve offers to deal in cash, and the other party may readily agree. However, you need to know that there are strict limits on how much cash can be involved in these transactions.
What is the Limit for Cash Transactions?
The government made some amendments to the Income Tax Act in 2015 under Sections 269SS, 269T, 271D, and 271E. According to these amendments, you can only make cash transactions up to ₹19,999. Failure to adhere to this rule can result in receiving a notice from the Income Tax Department.
For example, if you sell a piece of land for ₹1 lakh and receive the payment in cash, under Section 269SS of the Income Tax Act, you will be penalized by having to pay 100% of the transaction amount as a fine.
Penalty under Section 269T
If your deal gets canceled and the other party demands the payment back in cash, under Section 269T, you can only return up to ₹20,000 in cash. Any amount above this will again attract a penalty under Section 269SS, requiring you to pay a fine equivalent to the entire amount.
How Will the Income Tax Department Know?
You might wonder how the Income Tax Department will find out about cash transactions. The answer is through property registration. When you buy a property, it must be registered to legally become yours. During this registration process, all details of the cash transactions are recorded, making them accessible to the Income Tax Department, which can then take action against any violations.
How to Make Transactions?
For transactions above ₹19,999, you should use cheques or internet banking. It is important to note that this rule does not apply to the government, government companies, banking companies, or certain individuals and institutions designated by the central government.