Cash exp for improving house after buying

Tax queries 1528 views 7 replies

Hello everyone

 

An assessee has bought a house preoperty for his own residence last year. Before and after registery, he made a lot of cash withdrawl from banks which has been utilised for registering the property(stamp duty+document writer etc) and for some improvement and renovation of house.

 

My query is

1)whether this expense can be treated as 'cost of improvement' or be included in 'cost of purchase' for I. Tax Act.?

2)whether this expense can be considered for I. Tax in form of amount paid to labour(mason/painter/plumber etc) + purchase of material ( building material, paint material) for which no bill is available and payment made in cash?

 

Thanks

Replies (7)

Stamp duty and registration is not part of cost of aquisition nor cost of improvement. These expenses are available for deduction under the head transfer expenses. Even some legal fees paid to an advocate for drafting the agreement and doing background check on the property shall be transfer expenses.

Minor repairs cannot be included in cost of improvement. 

Stamp Duty & Regn Chgs can be Included in the Cost of Aquisition. ( Check the Capital Gains Sections for the Defination of Cost Of Aquisition ). Expenses for Repairs & renovations can also be added to the Value of Property.

As you mentioned you have done Cash Withdrawls & spent on Such Expenses. Nothing to worry. Stamp Duty & Regn will be allowed without any hassle of laws, but as to the Repairs & Renovations also you need not worry. The Cash Expenses Rule 6 does not have a Mention of Disallowance for & Restriction of Spendings or Purchase of Assets in Cash, So you can go ahead with Capitalising this Too in the Cost of your Property Purchases

Which rule 6 are you talking about???

How would assessee can justify these expenses (renovation) before income tax authorities, if asked for, when he does not have any bill/invoice for it??

My mistake. Stamp duty and registration is part of cost of acquisition. Brokerage and legal fees are part of expenditure on transfer.

As far as repair expenses is concerned, only major repairs, improvements and renovations are allowed to be part of cost of improvements. Bill and invoices are usually hard to obtain from a small-time contractor but bills for cost of material shall be available from a shop at the time of purchase.

Thanks for reply but what happens if there is not even a single PROPER bill available even for material purchase

 

Also expense done in present case is just minor repairs and renovation. In other words , there is no substantial improvement like building another room etc or demolish the existing structure & building the house in new way. Still these expense can be part of cost of improvement or not?

i) Stamp duty and document writer's fee can be added to arrive the 'COST OF THE HOUSE PROPERTY'.

ii)  Initial  repairing expenses to make the house habitable can also be added to arrive the 'COST OF THE HOUSE PROPERTY'.  But for want of bills/ vouchers the claim becomes debatable.

Thank You sir, for valuable suggestions


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