Tax on sale of Property through GPA

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  1. Ramani seshadri

    Ramani seshadri New Member


    1, I propose to sell my property worth Rs 2.50 crores. The property is located within Chennai city limits .The guideline value (revised now) is almost equivalent to the present market value and buyer insist on payment of advance income tax for registration. Is it required?

    2. The guideline values were revised to huge amounts and hence buyers mostly hesitate to go in for sale deed as they will have to account for such huge amounts. They all are insisting to give and register irrevocable unconditional GPA in lieu of sale deed. Can I give such GPA and if so what kind of risk I will have to face later as and when GPA holder sells the land?.

    3. Is there anyway to dispose off the land as I am very old and cannot go in for investing again on immovable properties to avoid capital gains tax. Also I have loans to be repaid.

    4. Finally, what will be quantum of capital gains I will have to pay in case of sale deed, if at all any buyer shows interest to buy the property with sale deed duly registered.?

    Can you please guide me in this regard.

  2. gaurav_kumar

    gaurav_kumar Well-Known Member

    1. The seller is not required to mention to the buyer about Advance Income Tax. However, TDS @ 1% of the purchase price would be deducted by the buyer from the amount paid to the seller.
    2. If you sell this property on GPA, you will still remain the legal owner as per govt records. As you would be the legal owner, there would be a slight risk in this case.
    3. You may find corporate buyers or salaried people who may be willing to buy from you as per the guideline value. It may take some time and effort but there are some people who prefer to register the property rather than buying through GPA
    4. If you dont intent to reinvest in property, you can buy bonds of REC/ NHAI and claim capital gains exemption under Section 54EC. Interest would be paid to you for the amount invested in these bonds
  3. Ramani seshadri

    Ramani seshadri New Member

    Thank you for your reply sir. You are right corporate buyers/salaried people have ability to put in white money and register. The problem with my property is it is located on the main highway within Chennai city. The plot is rectangular one with just 30 feet on main highway and 175 feet long. It is located adjacent to large Lake area supplying water to Chennai city. Hence no commercial people are able to get permission for apartments and only some small workshops like can be thought of in the said land. The guideline values were revised so high by the Government by about more than 50 percent. This raise has added further to existing rates and buyers are reluctant to go in for registration. They show interest to have GPA only and hold it for sometime.

    Can I finalise and what kind of problems I will have to face later?. Is there any other way so that I can dispose off the property.

  4. gaurav_kumar

    gaurav_kumar Well-Known Member

    Yes, you can sell it on GPA.

    There may be some slight problems, but if there is no other option - you should not worry about such problems.

    My only point is that in the records of the govt - you would be the legal owner and thats it.
  5. Ramani seshadri

    Ramani seshadri New Member

    Thanks a lot sir. I am very much obliged to you for your very quick and clear reply. As you said, I have no option absolutely for sale deed as there are no takers. I find there is a word such as slight risk in the case of GPA. Sir, can you please elaborate on the same and is there anyway by which I can safeguard or overcome such risks in future if there is any way to do it.

    I am told by one lawyer to split the property into many of my family members name using settlement deed method to reduce IT problems in future. Can you kindly advise me in this regard also.
  6. gaurav_kumar

    gaurav_kumar Well-Known Member

    Risk in the sense that you will continue to remain the legal owner of the property. And therefore, in case of any adverse happening - the govt may contact you bcoz as per govt records - you are the legal owner. For eg: If Property Taxes are not paid on time, the govt may contact you as you are the legal owner

    However, the risk is fairly less. If the deal is being done through GPA it is mainly the buyer who is at a loss as he does not become the legal owner of the property but is only in possession of the property.

    In case of sale through GPA, the seller bears 1% risk and the buyer bears 99% risk.
  7. Ramani seshadri

    Ramani seshadri New Member

    Thank you very much sir, for your timely replies. I have taken note of your advice.

    Once again I am obliged to you and kindly keep helping people with your valuable guidance. Chartered club deserves to be congratulated for having such devoted and sincere members.
  8. gaurav_kumar

    gaurav_kumar Well-Known Member

    Thank you for your blessings :)
  9. Maxwell Trevor

    Maxwell Trevor New Member


    I have received an immovable property from a far off relative as a gift through an Irrevocable registered GPA and a Registered Will. This was registered in the month of march 2015. I now want to sell this property for Rs 4500000 through a sale deed how should I pay income tax, and is there any legal way to reduce the amount of tax? The relative who has gifted the said property does not want to have any dealings in the said matter as she is settled abroad.
  10. Yatin Gandhi

    Yatin Gandhi Active Member

    @Maxwell Trevor : To save tax on Capital Gains on sale of property - they can invest this amount in Bonds or buy another property and claim income tax exemption under Section 54 or Section 54EC or Section 54F
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