Property seller faces scrutiny after accepting cash payments despite paying capital gains tax

A taxpayer disposed of two real estate units for a combined consideration of Rs 47.54 lakh, accepting cash payments from the buyers for these transactions. Records confirm that the seller fulfilled their legal obligation by paying the requisite capital gains tax arising from the transfers. Despite the tax payment, the direct handling of cash for property sales triggers separate regulatory concerns under Indian tax statutes. Transactions involving cash payments in real estate sales interact with specific statutory provisions that restrict cash dealings above prescribed limits, regardless of whether the resulting capital gains tax is fully paid.

Historically, sellers could focus solely on tax computation, but current enforcement strictly scrutinizes the mode of payment. Taxpayers who receive cash instead of banking channels face compliance risks even if tax dues are settled. Practitioners should examine all payment modes during property disposals and advise clients against accepting cash amounts that violate transaction limits. Professionals need to maintain rigorous documentation of bank channels for every sale and track upcoming notices or scrutiny assessments.

Bottom line: paying capital gains tax does not excuse non-compliance with cash transaction restrictions in property sales.