Property On-Money Tax: ITAT Caps It at 10%

A tax tribunal in Rajkot ruled that when buyers are suspected of paying cash 'on-money' for property, the addition to their income cannot exceed 10% of the deal value — and normal tax rates apply, not the harsh 60% flat rate under Section 115BBE.

Here's what happened: ITAT Rajkot ruled that suspected on-money additions in property deals cannot exceed 10% of the transaction value, limiting arbitrary tax officer assessments.. The tribunal directed that such additions be taxed at normal income tax slab rates, not under Section 115BBE which carries a flat 60% tax plus surcharge.. This ruling sets a precedent for property buyers facing income tax scrutiny over alleged cash payments made above the registered sale price..

What you should do: Check any pending income tax notices related to property purchases — if the officer has applied Section 115BBE on on-money allegations, you now have a strong tribunal precedent to challenge it.. Consult a tax professional and ask them to cite this ITAT Rajkot ruling when filing your response to any scrutiny assessment involving property transaction additions.. Always insist on fully documented, bank-transfer-based property payments going forward — clean paper trails make it nearly impossible for officers to allege undisclosed cash payments..

ITAT rulings are not binding on all courts but are strong persuasive precedents — your tax consultant can cite this order number in your assessment reply to pressure the Assessing Officer into limiting the addition.

For readers weighing their credit and loan options, our personal loan guide and CIBIL score resources put this update in context.