• Value in assignment agreement in case of resale properties

Hi,
I am buying a resale property (under construction) from Mr.S (Seller) who has entered into Sale Agreement and Construction Agreement with Mr.D. (Developer). 
1. Mr. S (Seller) has bought the Apartment from Mr.D (Developer) for say 25 Lakhs (excluding registration and stamp duty charges). 
2. Mr. S (Seller) is planning to sell to Mr.B (Buyer) at 40 Lakhs (excluding registration and stamp duty charges).
3. Mr. B (Buyer) has entered into MOU and paid 7 Lakhs Advance (2 Lakhs and 5 Lakhs as separate cheques on different dates. Total 7 Lakhs is confirmed to be received by Seller.
4. Mr. S(Seller) is now ready to enter into Assignment Agreement with Mr.B (Buyer) as a tripartite Agreement Deed executed by Builder. 
5. Mr. S (Seller) wants to leave the Sale Price as 25 Lakhs (which he already paid to Developer) and he insists that i can use the MOU signed along with the payment receipts (cheques) for the Bank Loan.

Since Mr.B (Buyer) is opting for a Home Loan for remaining amount of 33 Lakhs. 

a. What value should Mr. B (Buyer) be mentioning in the Deed of Assignment - 25 Lakhs or 40 Lakhs.

b. If Mr. B (Buyer) use 25 Lakhs in the Deed of Assignment, can Mr. B (Buyer) use MOU entered with Mr.S (Seller) which states the total sale consideration and advance payment made of 7 lakhs along with Deed of Assignment?

c. Is there any Tax, TDS for Mr. B (Buyer)?
Asked 4 years ago in Property Law
Religion: Hindu

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6 Answers

Mention what is agreed in MOU ie 40lacs

Seller wants to save capital gains tax by mentioning lesser value

But u insist for 40 lacs for 2 reasons

Firstly agreement value cannot be less than guideline value of govt. Otherwise you will face income tax issues that you did cash transaction. Even seller will fall in trouble

Second when you sell this property, you will incur capital gains for which you will have to pay tax. However there are deductions allowed from capital gains amount received. Like cost of acquisition. So if cost is less ie 25 lacs then you will have to pay tax on balance. Whereas if your purchase cost is 40 then your tax outgo will be lesser.

Even otherwise seller will be receiving purchase money by cheque. So he will have to account in his income tax. Whether entire sale price is mentioned in deed of assignment or in MOU, if purchase money is paid by cheque, then seller will have to account for it.

Also bank will not sanction loan on basis of amount mentioned in MOU. It will give loan for amount stated in registered assignment deed. Because even bank will want a security of higher value and not lower.

Thanx

Yusuf Rampurawala
Advocate, Mumbai
6876 Answers
79 Consultations

5.0 on 5.0

1. Sir as from buyers perspective for loan and tax relief the amount of 40 lakhs should be shown as the bank will give loan on the sale amount agreed further only from perspective of stamp duty 40 lakh will be more for buyer but still. Also in case any issue the seller can deny in future that is why correct value is always required to be mentioned.

2. After Assignment sale deed is executed MOU/agreement has no value therefore proper value should be mentioned in the agreement.

3. No TDS alternatively buyer shall get relief for purchasing house in the tax for bank loan EMI.

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

B should mention Rs 40 lakhs as consideration amount

2) buyer can use MOU enteted into with the seller

3) you have to deduct TDS at 1 per cent if sale consideration exceedsRs 50 lakhs

4) not applicable in your case

Ajay Sethi
Advocate, Mumbai
87893 Answers
6207 Consultations

5.0 on 5.0

a. The said procedure is differently followed though it is not your query. The seller shall have to issue a to the developer for transferring the allotment of the said flat in the name of B for which the developer will charge re-allotment fees as mentioned in the initial sale agreement. Thereafter the developer will issue a fresh allotment letter in favour of B based on which B will step in to the shoes of S. It has to be ensured that S has paid all the dues to D and a confirmation to that effect shall have to be taken by B from D. The sale deed will certainly be for Rs.25 L as was agreed by and between S & D which D can not change now. Th Bank may not act based on the value declared in the deed of agreement but on the value that will be or has been mentioned in the final sale deed original of which will be kept deposited by the lending bank or creating mortgage on the said flat.

b. Th Bank will consider the amount mentioned in the final sale deed as the value of the property mortgaged for providing loan ordinarily.

Krishna Kishore Ganguly
Advocate, Kolkata
26602 Answers
726 Consultations

5.0 on 5.0

Total value will mention in deed.

Yes

No TDS AS SALE consideration is less than 50 lacs.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

a. Since the buyer is buying the property for Rs. 40 lakhs, he has to mention that price only because the bank loan is also involved in it.

b. Don't complicate the issue, the buyer has to get a sale deed executed for the sle consideration amount he has paid in total or else it may be considered as under value and the bank may not grant loan beyond the requested value of the property.

c. If TDS is applicable then the buyer has to deduct the same at the time of making the final payment

T Kalaiselvan
Advocate, Vellore
78048 Answers
1543 Consultations

5.0 on 5.0

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