TAx Implications towards property advance.

Mr. P, my client, made an advance payment of Rs 604,310 towards a property in the year 2005 to Mr. X and entered into an agreement. However, the agreement never came to fruition. Recently, on 07-01-2023, Mr. X, the property owner, sold the property to another individual, Mr. Y. Interestingly, despite the initial agreement not materializing, Mr. P received Rs. 35,00,000 from Mr. Y as a result of his initial advance payment.

 

What is the tax implications for Mr. P?

Replies (6)
Quick Summary
This discussion addresses the tax implications for an individual who received a substantial sum after an initial property advance payment did not materialise. The key question is how to declare the received amount, with the consensus being to treat it as a capital gain on property rights, eligible for indexation benefits. The registered agreement and banking channel payment confirm the legitimacy of the transaction for tax purposes.

Whether the agreement of Mr X with builder was registered?

Whether the payment was made by Banking channel?

1. Yes sir, the agreement was registered.

2. ₹35 Lakhs was received through Banking Channel.

You can declare the income under Capital Gains, with indexation.

It is the gain over rights over a property.

Thank you very much sir.

You are welcome.          

Capital gain arises on transfer of capital asset.

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