If you are stuck in such a situation, here is what to do.

In the Indian real estate market, particularly in rapidly developing urban centres like Vikasnagar, it is an unfortunate but common practice for sellers to demand a portion of the property’s sale price in cash. This unaccounted-for cash component is often referred to as “black money.” This practice is primarily driven by a desire to evade taxes, such as capital gains tax for the seller and stamp duty for the buyer, by under-reporting the property’s transaction value on official documents.

Imagine a scenario where Mr. Sameer wants to purchase a property from Mr. Verma in Vikasnagar. The agreed-upon price is ₹1 crore. However, Mr. Verma insists that the sale deed should only reflect a value of ₹70 lakhs, with the remaining ₹30 lakhs to be paid in cash. For an honest taxpayer like Mr. Sameer, who has earned his money legitimately and paid taxes on it, this demand presents a significant legal and ethical dilemma. Engaging in such a transaction not only makes one a party to tax evasion but also carries substantial legal risks for both the buyer and the seller.

Advice in such cases

If you are faced with a demand for a cash component in a property deal, it is crucial to handle the situation with caution and awareness of the legal framework.

• Refuse to Pay in Cash: Firmly and clearly state your intention to conduct the transaction entirely through legal banking channels. Insist that the full sale price be reflected in the official agreement to sell and the final sale deed.
• Document Communication: If possible, keep a record of any communication where the demand for cash is made. This could include emails, text messages, or WhatsApp chats, which can serve as evidence if a dispute arises.
• Walk Away if Necessary: If the seller remains adamant about the cash component, be prepared to walk away from the deal. The legal risks and potential future complications associated with such transactions far outweigh the desire to acquire a particular property.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Applicable Sections of Law

The Indian legal system has several stringent provisions to curb the use of black money, especially in real estate transactions. Participating in such deals can lead to severe penalties.

• Income Tax Act, 1961: Section 269SS of the Act strictly prohibits any person from accepting a sum of ₹20,000 or more in cash for a transaction related to immovable property. A violation can lead to a penalty equivalent to 100% of the cash amount received, levied under Section 271D. Furthermore, Section 269ST prohibits receiving ₹2 lakhs or more in cash from a person in a day or for a single transaction.
• Benami Transactions (Prohibition) Amendment Act, 2016: If you pay a portion in cash and the property is registered at a lower value, the transaction could be investigated under the Benami Act. If the property is deemed “benami,” it can be confiscated by the government without compensation. The parties involved can also face rigorous imprisonment for up to seven years and a fine.
• Prevention of Money Laundering Act (PMLA), 2002: If the cash involved is found to be proceeds of crime, the transaction can fall under the ambit of PMLA, which has very stringent provisions for bail and can lead to property attachment and imprisonment.
• Bharatiya Nyaya Sanhita (BNS), 2023: If the transaction involves elements of deception or fraudulent inducement to part with money, it could attract provisions related to cheating under Section 318 of the BNS.

If you are the complainant

If a seller is pressuring you to pay in cash and you wish to take action, here are the steps you can follow.

• Gather Evidence: Collect all possible proof of the illegal demand, such as text messages, emails, or call recordings (check the legality of recording calls in your jurisdiction).
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.
• Report to Tax Authorities: You can file a formal complaint with the Investigation Wing of the Income Tax Department. Provide them with all the details of the seller and the evidence you have collected. The department can initiate an inquiry or a raid against the seller.
• File a Police Complaint: If the demand is accompanied by threats or coercion, you can file a police complaint for extortion or cheating under the relevant sections of the Bharatiya Nyaya Sanhita (BNS).

If you are the victim

If you have been coerced or defrauded in a transaction involving black money, your position can be complicated, but you still have legal recourse.

• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.
• Document Everything: Create a detailed timeline of events, including the amounts paid through banking channels and in cash. Preserve any agreements, receipts, or communications.
• Approach Authorities: Under legal guidance, you can approach the police or tax authorities. While you were also a party to the transaction, being a whistleblower or cooperating with the investigation may offer some leniency, especially if elements of fraud or coercion by the other party can be proven.

How the police behave in such cases

Initially, the police may be hesitant to register an FIR for matters that appear to be purely related to tax evasion, often directing the complainant to the Income Tax Department. This is because the primary offense is fiscal, not criminal, in nature. However, if your complaint clearly outlines elements of cheating (Section 318 BNS), criminal breach of trust (Section 316 BNS), or extortion, the police are obligated to register a case. An advocate’s assistance is crucial in drafting a complaint that highlights the criminal aspects of the seller’s conduct, compelling the police to take action as per the procedure laid down in the Bharatiya Nagarik Suraksha Sanhita (BNSS), 2023.

FAQs people normally have

What evidence is required?

Strong evidence is key to proving a case involving black money. This can include:

• A written Agreement to Sell that may or may not mention the cash component.
• Bank statements showing the official transfer of the “white” money component.
• WhatsApp chats, emails, or text messages where the cash demand is explicitly discussed.
• Audio or video recordings of conversations with the seller (admissibility may vary).
• Testimony from witnesses who were privy to the discussions, such as property brokers or mutual acquaintances.

How long will the investigation take?

Investigations into such matters are typically complex and time-consuming. An investigation by the Income Tax Department can take anywhere from a few months to several years, depending on the complexity of the case and the seller’s financial dealings. A police investigation under the BNS will also follow its own timeline as prescribed under the BNSS, which can be prolonged due to procedural requirements and court backlogs. Patience and persistent follow-up through your legal counsel are essential.

Advocate Sudhir Rao, Supreme Court of India