I orally made a deal with a person for buying 4 acres of agricultural land in Nagar Panchayat at Rs 2 Lacks per acre. It is his ancestoral land registered in his name, his forefathers owning it since 1950. Now I am planning to pay him 8 lacs and get land transferred in my name and Seller is OK with it. But seller is telling me that the registered sale deed market value (decided by district collector, according to which stamp paper is purchased), of the land is 93lacs, so he will have to pay income tax on 93 lacs and not on 8 lacs. My question is 1. wheather he will have to pay income tax on 8 lacs or 93 lacs. 2. Will I have to pay any tax? A lawyer is telling me that I have to pay tax on 93lacs - 8lacs = 85 lacs.
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The ancestral property is HUF?
The tax will be paid on the price recognised by the government/municipal corporation. Tax is to be paid on the market value irrespective of whether you buy it in less price or higher price. In your case since market price is higher tax is to be paid on market value rather than sale value.
Please consult a CA for further clarity on second point.