Sold a Home? ₹2.5L Cash Can Trigger Tax Notice

A Chennai woman sold her apartment, accepted ₹2.5 lakh in cash, and bought a new flat from her son-in-law. The income tax department slapped her with a notice. She fought back and won at ITAT Chennai — here's what every property seller must learn from this.

Here's what happened: A Chennai woman sold her apartment for ₹35.5 lakh, of which ₹2.5 lakh was received in cash — this triggered a Section 69A income tax addition by the assessing officer.. She reinvested the sale proceeds into a new apartment purchased from her son-in-law, claiming capital gains exemption under Section 54 of the Income Tax Act.. ITAT Chennai ruled in her favour, accepting registered sale deeds and bank transaction records as valid proof — and deleted the tax additions entirely..

What you should do: Avoid cash in any property transaction — even small amounts above ₹20,000 can attract scrutiny under Section 269SS of the Income Tax Act.. Save every document if you sell a home and reinvest: registered sale deed, bank transfer records, and purchase agreement — these are your shield against tax notices.. If you buy or sell property from a family member (spouse, parent, child, in-law), ensure the price is at fair market value and fully documented to avoid 'undervaluation' additions by the IT department..

Under Section 54, you can save 100% capital gains tax if you reinvest your home sale proceeds into a new residential property within 2 years of sale or 3 years if self-constructed — but every rupee must move through banking channels to prove the trail.