Joe 28 January 2018

Loan repayment using buyers funds

Hi, I am in talks with a prospective buyer for my flat in Chennai. The flat has a loan running which needs to be closed. The buyer has agreed to pay me funds in cash to close the loan so that it can be then registered in his name. My question is, what are the tax implications for me when I close the loan using cash funds from buyer?. Can I show that these funds are from buyer. Or do I have to show proper sources for this funds?

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8 Replies

R.Ramachandran (Advocate) 28 January 2018

There should be clear agreement to sell showing that the flat is under loan, and that uon receiving advance from the buyer, the flat will be freed from loan after repaying to the bank, and sale deed will be executed in favour of the buyer.

There is no bar if you get the money from the buyer in advance. But that should be in Cheque (and not in CASH as indicated by you). There will be no tax implication on you in getting the advance provided the same is adjusted against the ultimate sale consideration.

Joe 28 January 2018

Thank you for the quick reply. The issue as of now is, buyer is willing to pay only as cash. Hence, should I go ahead with this or is there a legal way to do this transaction.

R.Ramachandran (Advocate) 28 January 2018

It only means, that by accepting huge cash, you will be dealing in BLACK MONEY. In case of any trouble, the buyer will disown that he gave cash to you. You will be in great trouble sooner than later. Better avoid.

Joe 28 January 2018

Thank you sir. In case the buyer gives me a written statement, signed by him, stating that he has paid me the cash towards flat purchase, will it be OK?

R.Ramachandran (Advocate) 28 January 2018

As I told, in the written Agreement to sell, instead of advance paid in Cheque, you can make a mention that the advance was paid by the buyer by Cash. In that case no problem. ( I am sure, he will not agree to this. If he does, then I will be pleasantly surprised)