Difference between Sale Deed and Sale Price

1) Yes it will be a problem for you

2) Assuming you are selling residential house property and it is a long term capital asset. In such case to avail exemption of long term capital gain (LTCG), you have to utilize only LTCG for reinvestment in new residential house property. Time limit for purchase of new property is 2 years from date of sale, within 1 year before the date of sale and 3 years for construction from the date of sale

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1. Sale Deed Amount and Income Tax Verification: The difference between the sale deed amount (34L) and the actual payment received may indeed raise questions during income tax verification.  It's generally recommended to avoid such discrepancies and ensure that the declared sale amount matches the actual consideration received.

2. If you've sold a residential property and are looking to save on long-term capital gains tax by reinvesting in a new residential property, here's how you can proceed:

• Purchase of New Property: You can invest the entire amount into the new residential property. The time limit for purchasing the new property is 2 years from the date of sale, or you can even buy it within 1 year before the sale date.

• Construction of New Property: Alternatively, you have a time frame of 3 years from the date of sale to construct a new residential property using the gains to avail of the capital gains tax exemption.

Buying a Separate Plot: Unfortunately, if you wish to invest in a separate plot with the intention of saving on long-term capital gains tax, this option won't qualify for the exemption. The exemption under Section 54 of the Income Tax Act is specifically meant for investing in a new residential house property, either by purchasing one or constructing one. Investing in a separate plot won't provide you with the tax benefits associated with capital gains exemption.

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

1. Amount as per sale deed with builder will be treated as cost of acquisition of new property

2. Sale deed value 

I would recommend that you should accept and declare entire amount in cheque and should also offer it to tax as sale consideration of proeprty.

What is the nature of property you are selling. Is it plot or house property?

If you are selling plot you need to purchase new house of full sale value to save capital gain.

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Thank you.

Hi,

Under the scenario as mentioned above whatever be the buyer's intent behind considering the lower value as the sale/purchase value of the property it will definitely land you into trouble with respect to Income Tax.

It is suggested here to have the Registered deed on the full value if the entire amount is being paid on account further consider the entire receipts as you sale consideration and move ahead with the Capital Gains Computation. 

As regards saving Tax on Capital Gain,Please be clear that if you are selling a Residential House property (and not land) then you just need to invest only the amount of Capital Gain derived after deducting the Cost Of Acquisition and other relevant expenses and not the entire sale proceeds.

As regards the expenses on modular kitchen, false ceiling etc I may clarify that these are the expenses on improvement of House property they will not be considered as your cost of construction for claiming deduction and only the Registered Value shall be the amount considered as exemption.

However you may maintain the records of these expenses and claim them as cost of improvement while computing your capital gains if in case you decide to sell the new property in future.

Only the net amount after deducting the Cost of acquisition/improvements thereon and other relevant expenses shall be chargeable to Tax as Capital Gain and not the entire sale proceeds.

Hope it helps,do get in touch for any further clarification.

Question 1: Expenses Incurred During Construction of New Apartment

Expenses like GST, modular kitchen, and false ceiling can be considered as part of the cost of improvement for the new property. While not directly exempt, they increase the property's indexed cost, potentially reducing future capital gains.

Question 2: Calculation of Long-Term Capital Gain (LTCG)

LTCG applies to the surplus amount of (75L sale - Indexed cost of 40L property value). Indexed cost of acquisition, based on property value and inflation indices, determines taxable capital gains.

General Advice:

• Register the sale deed value for accurate acquisition cost.
• Transparently declare full sale consideration through cheques

Hope you find the information helpful. You are free to contact me for further discussion.If you could spare two minutes of your time to write a review, It would be really grateful and very happy to read it.

Thank you.

Shubham Goyal

Hey

1. Difference in sale deed amount and actual receipt in bank be a problem in case of IT verification:

Yes,

if you accept Rs34 Lakhs in sale deed & Actual receipts of Rs75 Lakhs in bank account will be major problems during IT verification because balance amount 75-34 i.e. Rs41Lakhs will be taxed as Income From Other Sources & tax payable on it as per slab applicable instead of LTCG  Tax @20%.

So I would like to to suggest you that Full Value Consideration of Rs.75Lakhs is received in bank account and make a sale deed for the same amount i.e.Rs75 Lakhs to avoid incometax notices & its monetary penalties with interest.

2.LTCG Tax Exemption:

As per section 54 of incometax act 1961,

If you've sold a residential property and are looking to save on long-term capital gains tax by reinvesting in a new residential property,then you can proceed with either of following:

A)Purchase of New Property: You can invest the entire amount into the new residential property. The time limit for purchasing the new property is 2 years from the date of sale, or you can bought it within 1 year before the sale date. OR

B)Construction of New Property: Alternatively, you have a time frame of 3 years from the date of sale to construct a new residential property using the gains to avail of the capital gains tax exemption.

 If you invest Rs.55 Lakhs to save LTCG then you need not to reinvest balance 20lakhs rupees beacuse you have to invest only Gain amount not like Net Proceeds under section 54F.
Amount of Exemption under section 54 shall be equal to Amount Investement(Subject to Capital Gains)

so it can be concluded that you need not to invest full amt i.e.75lakhs rupees,only Long term capital gain have to be invested.

Answer to further queries:

1)Amount specified in purchase deed of apartment will only qualify as exemption claimed under section 54

2)Long term captial gain applicabale on FVC(75lakhs) minus index cost of acquision (40lakhs) i.e. 35Lakhs taxable @ 20%plus H&EC @4%

I Hope you find this information helpful. Feel free to contact me for further discussion on Phone consultation

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Regards,

CA Vaibhav Garg