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Tax planning on sale of urban land

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)

14 May 2014

one of my relatives wants to sell his urban land purchased at rs. 10000 before 1981. the buyer is ready to pay 25lakhs (white money) but seller doesnt want to show all 25lakhs in the registry papers for sale of land but ready to pay tax on ltcg as computed on 25lakhs or avail benefit of sec. 54. now my query is that whether he can do registry of value less than 25lakhs and on the other side show in ITR total 25lakhs as sale value???? or is there any other way of tax planning other than sec. 54??

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6 Replies

Mihir (Wealth Manager) (5293 Points)
Replied 14 May 2014

First check the stamp value of the plot. If the stamp value is 20 lacs, then the sale deed should not be less than 20 lacs. The rest 5 lacs can be settled in cash. You may mention the black/white portion in the MoU, and finalise the deal in sale deed with a lesser value, but should not be lesser than stamp value.

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 14 May 2014

okk... so the value in sale deed can be less than 25 lakhs... thanx for this... but what about the second part of my ques. ? can i show the sale value of 25 lakhs in ITR even when my sale deed is below 25lakhs?

Mihir (Wealth Manager) (5293 Points)
Replied 14 May 2014

You cannot show cash portion in ITR. You will have to show what is in the sale deed. Hope you manage the cash portion wisely after consulting a CA.

Income Tax Wala: (Fin. Expert) (Chartered Accountants) (2010 Points)
Replied 15 May 2014

first of all you can't get the registry done below the stamp value if you do so than difference amount is taxable in hands of buyer as well as seller lets take an example

stamp value say 25 lac

registry done for 20 lac

than 5 lac taxable in the hands of buyer u/s 56 (2)(vii)b and

and 5 lac taxable in hands of seller u/s 50 C

second question : you will have show in your ITR only registry value and can claim exemptions u/s 54 F , 54 EC only for that amount.

Hope now your query sorted out