LTCG on sale of apartment

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qqqqq

21 Points Posted on 21 September 2025

My CA filed my ITR for AY 25-26 a few days ago. I have claimed 20L (indexed to 30L) cost of improvement and transfer costs, which I don't have any documentary proof for (neither invoices nor bank transactions - it was all done in cash). The tax "saving" is 6L.

As per my CA, the chances of this being scrutinized is <1%. So, I went ahead with it. But now I am having second thoughts -- if the scrutiny happens, I will have no documentary proofs to back up my claim and will have to shell out ~20L for tax, interest, and penalty.

What is the best course of action for me? Should I follow my CA's advice? Or, file revised return and pay the additional tax? I am not sure if my CA is trying to "save" me some money or trying to get me in a potentially bad situation to extract more money from me later on.

Replies (3)

Quick Summary

This discussion revolves around the tax implications of selling an apartment, specifically Long Term Capital Gains (LTCG). The user claimed significant improvement and transfer costs without documentary proof, leading to a substantial tax saving. However, they are now concerned about potential tax scrutiny and the severe penalties if the claims cannot be substantiated. The advice given highlights the risks of such claims and suggests filing a revised return to avoid future liabilities and sleepless nights.

Ranjan

1130 Points Posted on 21 September 2025

@ qqqqq

These days, AI is doing a very fast tally and likely to pick out your return for scrutiny.

Do whatever is best to avoid sleepless nights.

Aashok Kumar Sharma

Finance/Compliance Consultant

77979 Points Posted on 06 November 2026

Claiming ₹30L in improvement and transfer costs purely on cash without documentary proof creates a severe vulnerability under income tax scrutiny; if a notice arrives, you risk paying back the ~₹6L tax savings along with heavy interest and penalties, making a proactive review or correction through an updated return the safer route to avoid severe future liabilities.

Rushabh

Automation Expert

10733 Points Posted on 14 November 2026

Do not base the decision on the estimated chance of scrutiny. A deduction should reflect expenditure actually incurred and be supportable; claiming a figure you cannot substantiate can lead to disallowance, tax and interest, and potentially penalty depending on the facts. Cash payment by itself does not automatically make a genuine improvement cost inadmissible, but lack of invoices, payment records or other corroboration makes it harder to establish the amount and nature of the work. “Transfer costs” also need to be genuine expenses connected with the transfer.

Ask your CA for a written, item-wise basis for the ₹20 lakh claim: what work or costs it covers, how the indexed figure was calculated, and what alternative evidence exists (such as contractor details, contemporaneous records, approvals, correspondence or property records). If the claim is not genuine or cannot reasonably be supported, discuss correcting the return and paying the resulting tax and applicable interest. A revised return is generally available only within the statutory time limit and if the relevant conditions are met; your CA should verify the current deadline and the precise correction route for this filed return. Get a second professional review if you remain uncomfortable, and retain the computation and advice.

For a capital-gains review, keeping each improvement and transfer expense linked to supporting records makes a material difference. Manual practice work is difficult, and automation can reduce repetitive collation and calculation while professional judgment remains in control. At Jir AI, our 2,000+ AI agents and 650+ integrations streamline GST, ITR, TDS, TCS and other compliance workflows, helping reduce manual workload by up to 70%. For a smoother compliance workflow, connect with us on WhatsApp: https://wa.me/message/3HVOZ7HIY4ESC1