LTCG exemption for full sale value or only for value indicated in the sale deed?

Dear Mr. Pankaj

I am selling a residential urban site for Rs. 45 lakhs. The buyer would like to show only Rs. 20 lakhs in the sale deed as per present govt. rates. He will give me DD for Rs. 20 lakhs and balance in cash.

I am going to construct a new house immediately, the estimate of which is Rs. 45 Lakhs. I would like to know

1) whether I can deposit the Rs. 25 lakhs cash in bank and make use of it for the construction as and when required?

2) Will I get exemption from LTCG for the full Rs. 45 Lakhs.

3) What should I do to avoid income tax liability?

Your immediate reply will be a great relief to me.

Thanks in advance,


asked Mar 05 '12 at 15:32 by vilsy 1111

Your sale consideration value would be considered Rs 20 lakh only as registration/sale deed says so.

So in order to save income tax fully on capital gains, you would need to spend 20 lakh in construction of new house u/s 54F.

25 lakh cash accepted by you in cash would be sort of black money as there is no legal record of this payment. It would be an issue if you deposit this huge sum in bank. Income tax department would send notice to you to explain sources of such high amount of cash.

answered Mar 07 '12 at 17:44 by Pankaj Batra 5.2k320

Thank you, Mr. Pankaj for the prompt reply.
(Mar 08 '12 at 16:01) vilsy
Hi pankaj, As all financial transactions are recorded in the pan there is every possibility that income tax can ask us if we invest that money in equities ? So what can be done to avoid for this kind of things(in a legal way) or holding cash is the only way? Pls guide me.
(Mar 08 '12 at 23:43) vignesh
Not showing full sale value in sale deed is not legal and have implications if one is found guilty of. Once you don't show the extra amount in income, it become black money and hence keeping it at home as cash is the only way. You can use it for cash purchases like furniture, electronics etc. This is how Indian system works!
(Mar 09 '12 at 14:31) Pankaj Batra

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Asked: Mar 05 '12 at 15:32

Seen: 1,396 times

Last updated: Mar 09 '12 at 14:31