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Compliance portal: Tax liability from Purchase of Immovable Property

by | Apr 25, 2024 | Income Tax | 0 comments

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Important Keyword: Immovable Property, Tax Liability, Income Tax Returns.

Tax Liability from Purchase of Immovable Property

In the realm of income taxation, addressing compliance queries regarding the purchase of immovable property is paramount for taxpayers. Here’s a simplified guide to understanding these processes:

Understanding Compliance Queries:

Taxpayers who have purchased immovable property from undisclosed income may receive queries on the compliance portal. According to the Income Tax Act, any unexplained investment is deemed as income for that financial year under sections 69 and 69B.

Key Aspects to Consider:
  1. Valuation Discrepancies: If a person receives an immovable property without consideration or with disclosed consideration lower by more than Rs. 50,000, the difference will be considered as income in the hands of the purchaser.
  2. Pre-Sale Agreements: If a sale has not been executed but an agreement of sale is prepared, provisions of section 50C and 56(2) will apply.
Encountering Verification Challenges:

Taxpayers may receive verification notifications from the Income Tax Department (ITD) via SMS, calls, or emails for various reasons:

  • Non-filing of Income Tax Returns (ITRs) for the given assessment year, potentially leading to pending tax liabilities.
  • Discrepancies between taxpayer-provided details and information received by the ITD for that assessment year.
  • Reporting of significant transactions during a financial year considered abnormal or out of line with the taxpayer’s profile.
Responding to Verification Issues:

Taxpayers facing verification issues must promptly submit a response on the compliance portal. This response should be submitted online by logging into the compliance portal.

Verification issue in the computation of tax liability on the Purchase of Immovable Property
CodeDescriptionResponse
A1Correct Information ValueAmount + Remarks
A2Out of earlier income or savingsAmount + Remarks
A3Out of receipts exempt from taxExempt income-wise list
A4Received from identifiable persons (without PAN)PAN wise list
A5Received from identifiable persons (without PAN)Person wise list 
A6Received from un-identifiable personsNature of transaction wise list 
A7OthersAmount + Remarks
A8Unexplained amountA1- (A2+A3+A4+A5+A6+A7)

In the intricate landscape of taxation, comprehending the intricacies of immovable property transactions is paramount for taxpayers. Here’s a simplified roadmap to help taxpayers navigate these processes:

A1- Total Investment: Declare the aggregate amount paid for the purchase of immovable property, encompassing the purchase price and associated expenses like stamp duty. In cases of co-ownership, specify one’s share of investment, providing details such as name, PAN, and share of other co-owners in the remarks section.

A-2 Out of Previous Income or Savings: If any portion of the investment or expenditure originates from prior income or savings, it must be disclosed along with the amount in this category. Appropriate remarks are essential in the remarks section.

A3- Expenditure from Tax-Exempt Receipts: Choose from available exemptions to determine the value of the receipt, including interest income, dividend income, long-term capital gains on shares, agricultural income, share in the total income of a firm/AOP, income not taxable in India, or others.

A4- Receipts from Identifiable Persons (with PAN): Detail any amounts received from identifiable persons holding a valid PAN, categorizing them based on transaction type such as sales, loan received, loan repayment, gift received, donation received, or other receipt. Specify transaction mode as ‘Cash’ or ‘Non-cash’, with suitable remarks provided.

A5- Receipts from Identifiable Persons (without PAN): Record amounts received from identifiable persons lacking a PAN, adhering to the transaction table format.

A6- Receipts from Unidentifiable Persons: Document amounts received from unidentifiable persons, following the prescribed table format.

A7- Miscellaneous Expenditures: Declare any amounts not fitting into the above categories in this section, ensuring suitable remarks are provided.

A8- Unexplained Amount: Calculate the difference (A1 – (A2+A3+A4+A5+A6+A7)), representing amounts lacking explanation.

By mastering these concepts and accurately completing property transaction declarations, taxpayers can ensure compliance with tax regulations and foster a transparent tax environment. Diligent adherence to these guidelines is imperative to mitigate potential discrepancies or penalties associated with unexplained amounts.

Read More: Compliance Portal: Tax Liability from Purchase of a Movable Asset

Web Stories: Compliance Portal: Tax Liability from Purchase of a Movable Asset

Official Income Tax Return filing website: https://incometaxindia.gov.in/

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