Selling a Flat? On-Money Tax Rules Cost You 30%

If you paid or received 'on-money' — cash above the registered price — during a property sale, the tax department can now tax it year by year, not just in one go. Here's what that means for your wallet.

Here's what happened: An income tax tribunal in Surat ruled that undisclosed 'on-money' received from flat sales must be taxed in the year each individual flat was actually transferred, not bundled into one assessment year.. 'On-money' is the illegal cash component paid above the official stamp-duty registered price — a widespread practice in Indian real estate that inflates black money in the system.. The ruling means tax authorities can now map each on-money receipt to its transaction year, closing a common defence where sellers argued the amount wasn't taxable in a particular year..

What you should do: Check all property sale agreements from the last 6 years — if any deal involved cash payments above the registered price, consult a chartered accountant immediately before the tax department flags it.. Avoid paying or accepting on-money in any future property transaction; insist on full payment via banking channels and ensure the registered price reflects the true deal value.. If you have already disclosed such income in past ITRs, verify that the year of disclosure matches the actual year of flat transfer — a mismatch alone can trigger a scrutiny notice..

If on-money was discovered during an IT survey and you signed an undertaking, the year of that undertaking — not the survey date — may determine your tax liability year. Get this verified by a tax lawyer before filing.

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