Income tax, Capital gains on plot sale purchase via Power of Attorney

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This discussion clarifies how to calculate capital gains tax when a plot is sold using a Power of Attorney (POA) without a registered sale deed. The key is to have a sale agreement and proof of payment. The income should be declared under capital gains on rights over property, not as Income from Other Sources (IFOS). You can also claim the deducted TDS against the capital gains offered.

Lokesh

Lokesh (Querist)

20 June 2023 Mr. A purchased a plot from person Mr B in Gurgaon through POA in 2021. Hence A paid 40 lakhs to B.
Mr. A then sells the plot to Mr. C through POA in 2023 in 60 lakhs. Since there is no Sale deed or registry happened, how capital gains for Mr A would be calculated, while filing his taxes?

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

20 June 2023 Offer Rs. 20 lakhs under head IFOS.

Lokesh

Lokesh (Querist)

20 June 2023 Thank you Dhirajlal sir. My doubt is IT dept would see amount of 60 Lakhs deposited in Mr C account, so will consider that as Income. Would IT dept treat showing 20 Lakhs (Instead of 60 Lakhs) in IFOS as underreporting of income?

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

20 June 2023 You have proof of Rs. 40 lakhs payment or not?

Lokesh

Lokesh (Querist)

20 June 2023 Yes Mr C has proof of 40 L payment. But wont IT dept send notice once they see only 20L in IFOS when amount received from sale is 60L

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

20 June 2023 Give break up of total amount over expenses incurred.

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

20 June 2023 Do you have Sell agreement along with POA?

Lokesh

Lokesh (Querist)

20 June 2023 Yes, The agreement of sell is there with POA. Breakup is simple all money is for plot only. no construction

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

20 June 2023 In that case you can declare it under Capital gain over rights over an property, if you have possession letter along with sale agreement..

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Lokesh

Lokesh (Querist)

21 June 2023 Thank you sir. Is it also necessary to show deducted TDS 1% under 194s

Dhirajlal Rambhia

Dhirajlal Rambhia

(Expert)

21 June 2023 Yes, you can claim the TDS deducted against capital gain offered.

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