A real estate agent in Chennai is offering to pay a sum of40 Lacs to owner of a plot for getting a POA registered by the owner in the agents name. This seems like an arrangement where the agent will get a buyer and sell the plot to the buyer in future. It appears like this payment will be done in cash only. The agent claims that the cash paid can be retained by the owner until the actual sale happens - after which the same can be reported as capital gains as per owner's original cost basis. The assumption here is that the agent is paying the owner the sale deed value of the future sale.
Question is: if POA is done in 2011 in Tamil Nadu, I believe a 4% stamp duty is a must for registration if POA mentions the cash value. If POA says zero cash exchanged then the money paid by agent to the owner is like a cash income under other sources for the owner unless the home sale happens immediately. Is this true ? Does the owner have an income tax liability now even though the amount being paid by agent to owner is more like a sale deed proceed ? A general reading of tax laws for cash received from non-relatives suggests that any payment not under existing heads of income will be income under other sources irrespective of what the reason behind receiving them is.
Eventually when the sale does happen, the owner is also responsible for capital gains tax. So if sale does happen say a year later in the next tax year, then the owner will have to report the CG and settle it in his tax returns ? The concern here is whether this entire arrangement is legal and if yes, at the time of receiving cash in lieu of POA (sometimes treated as conveyance of sale by registrar) does owner have the income tax liability (about 30%) and a separate CG liability (20% or 10% depending on how old property is) when the actual sale occurs. We know that a POA is not same as an actual sale to a buyer.
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