buying and selling land using cash

Hi, I bought a land (plot) in March 2007 for Rs4,50,000. The buyer insisted on cash payment and the registration was also done as per circle rates (Rs40,000) which was very less. I paid by white money (withdrawn from bank) to him all the Rs4,50,000. Now, I have sold this for Rs8,80,000, and the registration is also done as per current circle rate of Rs54,000/. Now, I have few questions. 1) My actual net income is 8,80,000 - 4,50,000, which is Rs4,30,000/- I am ready to pay 20% tax for this income. Now, how do I prove that my purchase cost was Rs4,50,000? Since the registration papers are not showing the actual money that I spent, what is the alternate option to show to income tax department about the actual? 2) I have deposited my current income of Rs8,80,000/- into three banks. I want to buy another plot in a different place. The other plot owner is also insisting on paying everything by cash. Again, the registration is also based on circle rates which is very low. Is there a way to make it legal with everything as white? Regards, Sriram.

asked Jul 01 '11 at 16:05 by sriraman2011 1111


First of all, I appreciate your honesty and willingness to transact in the legal manner.

Unfortunately, whole Indian real estate market has been built on top of corruption and illegal practices. There is little we can do to correct this.

Due to current tax structure, Not showing actual transaction amount in books saves both buyer and seller a huge amount of money. Buyer saves in registration cost, seller saves by hiding his actual gains. And this cycle continues forever.

Bad part is that, politicians, government employees and builders are all involved in this mess and nobody wants to solve this.

Coming back to your questions:
1. You cannot now show that you sold property for 8.8 lakhs, as there will legal issues involved. Apart from you, the buyer will also be under scrutiny for this transaction. If you want to fight it out, you can do it, but there will be lots of inconveniences.
2. As you deposited cash into three banks, income tax department again can ask you the source of this income, which will again open the pandora box. Things would have been different if you would not have started this chain by not buying in cash at the first place.

answered Jul 02 '11 at 12:06 by pankaj 5.2k320

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Asked: Jul 01 '11 at 16:05

Seen: 1,681 times

Last updated: Jul 02 '11 at 12:06