Compliance portal: Tax liability from Sale of Immovable property

Important Keyword: Section 45, ITR, income tax.

Income Tax liability from Sale of Immovable property

In the realm of income tax regulations, understanding the intricacies of capital gains tax is essential for taxpayers. When selling immovable property, capital gains tax, as per Section 45 of the Income Tax Act, becomes applicable. However, it’s crucial to recognize that capital gains can be classified into two categories: long term and short term. The tax liability incurred varies depending on the type of capital gain realized from the sale.

Moreover, taxpayers may encounter verification issues from the Income Tax Department (ITD) via SMS, calls, or emails. These verification concerns typically stem from three primary reasons:

1. Non-filing of Income Tax Returns (ITRs) in the given assessment year, resulting in potential tax liabilities pending.
2. Discrepancies between the details provided by taxpayers and the information received by the ITD for that assessment year.
3. Reporting of significant transactions during a financial year that appear abnormal or inconsistent with the taxpayer’s profile.

Taxpayers facing such verification issues are required to respond promptly. This response process can be conveniently completed online by logging into the compliance portal provided by the ITD.

By ensuring compliance with capital gains tax regulations and promptly addressing any verification concerns raised by the ITD, taxpayers demonstrate their commitment to fulfilling their tax obligations responsibly. This proactive approach not only ensures adherence to tax laws but also fosters trust and transparency between taxpayers and tax authorities, ultimately contributing to a fair and efficient tax system for all.

Verification issue in the computation of tax liability from Sale of Immovable Property

Code	Description	Response
A1	Total receipts as per taxpayer pertaining to the above information	Amount + Remarks
A2	Value adopted or assessed for the purpose of payment of Stamp Duty	Amount + Remarks
A3	The value is taken for computation of capital gains	Amount + Remarks
A4	Less: Amount relating to another year/PAN	PAN year-wise list + Remarks
A5	Less: Amount covered in other information	Amount + Remarks
A6	Less: Exemption/Deduction/Expenditure/ Set off of Loss	Exemption/Deduction wise list + Remarks
A7	Income/Gains/Loss (A1-A2-A3-A4)	Amount + Remarks

In the realm of property transactions, accurate reporting and disclosure play a pivotal role in ensuring compliance with tax regulations. Here’s a simplified guide to understanding the various declarations required from taxpayers:

A1: Total Receipts Taxpayers must declare the total gross value of receipts or payments received pertaining to the property transfer.

A2: Stamp Duty Value Declare the amount of stamp duty paid or payable for the property transaction. If the sale amount is lower than the stamp duty value as per Section 50C or 43CA, it affects the computation of income.

A3: Value for Capital Gains Computation Disclose the value considered for computing capital gains from the property transaction. If the stamp duty value exceeds the sale amount and claims are made regarding fair market value discrepancies, provide appropriate remarks.

A4: Amount Related to Another PAN or Year If any part of the income or receipts relates to another person’s PAN or another assessment year, provide details accordingly.

A5: Rectification of Repeated Coverage If any amount is mistakenly covered twice, nullify the repetition by stating it under the Remarks section of the relevant table.

A6: Exemptions, Deductions, and Expenditures Declare all available allowances that are exempt from taxation, such as agricultural land outside specified limits, capital gains deductions, or set off of losses. Select the appropriate category from the drop-down list and provide details accordingly.

A7: Self-Computation of Income Calculate the income from house property chargeable to tax using the formula A5 = (A1 – (A2 + A3 + A4)). If the computed income exceeds the minimum threshold of Rs. 2.5 lakh, taxpayers should ensure to file their Income Tax Returns (ITRs) accordingly.

By understanding and accurately completing these declarations, taxpayers ensure compliance with tax laws and contribute to a transparent and efficient tax system. It’s essential to fulfill these requirements diligently to avoid any potential discrepancies or penalties associated with property transactions.

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