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How to be prepared for a tax query in case of Property Sale

With property prices hitting new highs, encashing the hidden value may be the first thought in minds of many.


Now were you aware that the tax authorities are snooping around on property transactions with a flag on all transactions (Buy/Sell) in excess of Rs. 30 Lakhs. This transaction is mapped with the Income Tax Return (ITR) of an individual to verify if the transaction is reported correctly along-with the capital gain & reinvestment (if any).


This brings up the point of what you should do to be prepared to face any query that may be posed by the tax authorities. Bring on record the following information / documents to rest easy.


Sr. No.


Information / Documents


Purchase Details

a)  Copy of the Purchase Agreement along-with the Stamp Duty paid receipt & Registration Fees receipt

b)  Bank statement with the property related transactions highlighted

c)  In case a home loan was taken for acquiring the property then the copy of the sanction letter, disbursement letter, copy of the cheque & receipt for money paid to the seller.

d)   Receipt for any Brokerage paid along with the cheque details & bank statement copy.

e)   In case brokerage was paid in cash then the receipt should be affixed with a revenue stamp & the bank statement should clearly show the withdrawal.

f)      If any transfer fee was paid to the society then the receipt for the same with cheque details.



Interiors spend & home improvements details

a)  Expense bills for the spends done on interiors

b)  Bank statement reflecting the payments made to the contractors / Interior Designers

c)   In case cash has been paid to contractors then the corresponding withdrawal from bank has to be reflected



Sale Details

a)      Copy of the sale agreement

b)     Copy of the bank statement reflecting the credits for the sale consideration

c)      Copy of receipt for brokerage paid (if any) along-with copy of bank statement reflecting this payment. If it has been paid in cash then such withdrawal should be reflected in the bank statement & the receipt should have revenue receipt affixed.

d)      Letter of handing over possession of the property

e)      Transfer letter copy from the society

f)       Home loan closure letter from the Financial Institution along-with the receipt for closure amount paid (if any).

g)      TDS certificate in Form 16B to prove claim of refund for the TDS effected by the buyer @ 1% of the sale proceeds



Statement of Capital Gain


a)   Prepare a statement of capital gain / Loss & keep on record


Reinvestment Details

a)   If the reinvestment has been done in a new property then all points listed in (1) above are to be maintained

b) If reinvestment is made in capital gains bonds then the copy of the bond along-with the receipt & bank statement has to be kept on record



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