Land purchases above Rs 30 lakh get flagged under Section 285BA.
Tax department checks if declared income supports the property investment.
Differences between stamp duty value and purchase price may attract taxes.
Keep records, declare income honestly, and respond promptly to notices.
When Your Dream Plot Turns Into A Tax Nightmare
Buying land can invite tax scrutiny if your income, funding source, or stamp duty value don’t match. Keep records and stay transparent to avoid trouble
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Summary
Buying a piece of land is often seen as a major life achievement, according to a recent report by the Economic Times, but what many don’t realise is that such purchases can attract unwanted attention from the tax department. Even a perfectly legitimate land deal can end up under the tax scanner if the figures don’t quite match up, whether it’s the declared price, the money trail, or the value recorded for stamp duty.
Why The Taxman May Take Notice
Whenever a property deal crosses Rs 30 lakh, the Income Tax Department automatically gets a report under Section 285BA of the Income Tax Act. Once that happens, the department’s system compares the purchase value with your declared income and previous tax filings to see if the investment looks reasonable. If your earnings don’t appear to support the size of the purchase, the transaction could be flagged for further checks. If a person with modest declared earnings buys a costly plot, the system may automatically flag the deal.
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Trouble also arises when the sale consideration is lower than the stamp duty value. The difference can be treated as “income from other sources” and taxed accordingly. If the money for the plot has come from cash in hand, friendly borrowings, or gifts that haven’t been officially shown in your records, the tax officer could ask where it really came from.
In many cases, buyers receive notices asking them to explain how they financed the purchase. If you can’t give a clear explanation or show proper papers, a simple query from the tax office can soon turn into a detailed probe.
How To Keep Things Straight With The Taxman
Before buying land, make sure every rupee you’re using can be traced, whether it came from your bank account, a loan, or the sale of another asset. Keep copies of transfer slips, receipts, and any related documents. If part of the money came from a family gift or inheritance, record it properly in your tax filings ahead of the purchase.
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And if a notice does come your way, don’t leave it unattended; reply as soon as you can, even if it’s just to ask for some extra time. Keeping quiet only makes matters worse; it can lead to avoidable fines and extra trouble.
At the end of the day, being open and organised is what really helps. If your papers are in place, your income declared honestly, and your returns filed on time, you’ll have little to worry about. A bit of care now ensures that your plot stays a happy investment instead of turning into a tax worry later.
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