What is the limit of cash payment on property purchases?
As much as it is important to make arrangements for money when buying property, it is also important to know the rules on buying and selling property. Limitation of payment on property in India: Most of us buy and sell various types of property like houses, shops, and land. As important as it is to make financial arrangements when buying property, it is also important to know the rules of buying and selling property. If you want to buy or sell property, it is good to know the complete rules regarding the transaction. Buying and selling property is a big investment. Some of them buy property with their own money, and some take loans from banks. We also have some options for the person buying or selling the property. Sometimes they also offer to transact in cash. However, the full price of the property cannot be paid in cash. There are formal rules for this too. If you violate these limits on cash transactions, you are likely to receive an Income Tax Notice.
One cannot buy more than Rs 19,999 in cash irrespective of the amount of the property transaction. For this, changes were made in sections 269SS, 269T, 271D, and 271E of the Income Tax Act, 2015. Of this, the change made in the 269SS is very important. It tells about the penalty to be imposed in such situations. The government did this to curb black money. After a cash transaction takes place, it becomes difficult to ascertain whether the money was earned legally or illegally. Under section 269SS, if a person buys land (even if taken for agriculture), a house, or other immovable property for sale in cash amounting to Rs.20,000 or more, he will be liable to a 100 percent penalty. Let us try to understand this from the example given below.
What is a 100 percent penalty?
Under Section 269SS of the Income Tax Act, if a person receives Rs.20,000 or more in cash on the sale of property, the entire amount must be paid as compensation. That means, whether you bought Rs.50,000 or Rs.1 lakh, the entire amount will go to the Income Tax Department as a penalty.
Another section 269T of Income Tax makes this even stricter. If the contract is canceled for some reason and the buyer of the property from the property dealer or seller asks for cash back, the penalty is again imposed. 20,000 or more in cash, the entire amount will be penalized as per 269SS. However, this Act does not apply to certain individuals and organizations identified by the government, government Agencies, banking Institutions, or the Central Government.