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

Mr. Alok Sharma, a resident of the city of Suryanagar, decided to sell his 2BHK flat in the “Harmony Apartments” complex. His goal was to use the proceeds to purchase a larger home for his growing family in a new development called “Green Valley Estates.” Being a salaried professional, Mr. Sharma was unfamiliar with the intricacies of high-value property transactions. He was particularly concerned about the safest method to receive the substantial sale amount from the buyer, Mr. Vikram Singh, and how to manage the transaction to legally minimize his tax liability while ensuring the funds were secure for his next purchase.

Advice in such cases

Handling large sums from a property sale requires careful planning to ensure security, legal compliance, and tax efficiency. Here are the key steps to consider:

• Use Secure Banking Channels: Insist on receiving payments through secure and traceable methods. The most common and recommended methods are Real-Time Gross Settlement (RTGS) or National Electronic Funds Transfer (NEFT) directly to your bank account. For the initial token amount or advance, a Demand Draft (DD) or a cheque is also acceptable. Avoid large cash transactions, as any cash payment exceeding ₹20,000 for a property transaction is prohibited under the Income Tax Act.
• Execute a Detailed Agreement to Sell: Before accepting any significant payment, ensure a legally sound ‘Agreement to Sell’ is drafted and registered. This document should clearly outline the total sale consideration, the advance amount paid, the payment schedule, the details of the buyer and seller, the property details, and the timeline for completing the sale.
• Understand TDS (Tax Deducted at Source): As per Section 194-IA of the Income Tax Act, the buyer is responsible for deducting TDS at 1% of the total sale price if the property value is ₹50 lakh or more. Ensure the buyer deposits this amount with the government and provides you with Form 16B as proof. This is crucial for you to claim credit when filing your income tax returns.
• Plan for Capital Gains Tax: The profit you make from selling a property is subject to capital gains tax. You can save on this tax by reinvesting the proceeds into another residential property within a specified period (under Section 54 of the Income Tax Act) or by investing in specified bonds (under Section 54EC).
• **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

Property transactions and related disputes are governed by several key Indian laws:

• The Transfer of Property Act, 1882: Section 54 defines ‘sale’ and mandates that the transfer of tangible immovable property of a value of one hundred rupees and upwards can be made only by a registered instrument. Section 55 outlines the rights and liabilities of the buyer and seller.
• The Income Tax Act, 1961: Section 194-IA governs the TDS on property sales. Sections 54 and 54F provide for exemptions on long-term capital gains if the proceeds are reinvested. Section 269SS prohibits accepting loans or deposits (including property advances) of ₹20,000 or more in cash.
• The Registration Act, 1908: This Act mandates the registration of documents related to property transactions, such as the Sale Deed, to give them legal validity.
• Bharatiya Nyaya Sanhita, 2023 (BNS): If the transaction involves fraud, cheating, or forgery, criminal law comes into play. For instance, Section 318 of the BNS, which deals with cheating and dishonestly inducing delivery of property, would be applicable in cases of payment fraud.

If you are the complainant

If you are the seller and the buyer defaults on payment, provides a fraudulent cheque, or commits any other form of cheating, you are the complainant. Here is what you should do:

• Gather all Documents: Collect the Agreement to Sell, any proof of partial payment received, bounced cheques (if any) along with the bank return memo, and all communication records with the buyer.
• Send a Legal Notice: Your lawyer should send a formal legal notice to the buyer, demanding the fulfillment of the contract (i.e., payment of the remaining amount) within a specific timeframe. This is often a prerequisite for initiating legal action.
• File a Complaint: If the buyer does not comply, you can file a civil suit for specific performance of the contract or for damages. If elements of fraud or cheating are present, you can also file a criminal complaint (FIR) with the police under relevant sections of the BNS.
• **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.

If you are the victim

As a victim of payment fraud in a property sale, your immediate actions are crucial to mitigate your losses and initiate the recovery process.

• Secure Your Bank Account: If you suspect any fraudulent activity related to your bank account, inform your bank immediately to block any unauthorized transactions.
• Do Not Hand Over Possession: Do not hand over the physical possession of the property or the original property documents until you have received the full and final payment and it has been cleared in your account.
• File an FIR: Go to the local police station and file a First Information Report (FIR) detailing the entire incident of cheating or fraud. Provide copies of all relevant documents to the police.
• **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.

How the police behave in such cases

When a complaint related to a property transaction is filed, the police initially assess whether the matter is purely civil or has criminal elements. If the dispute is about non-payment as per the agreement, they may advise you to file a civil case. However, if there is clear evidence of criminal intent, such as the use of forged documents, a bounced cheque issued with dishonest intent, or a clear case of cheating from the outset, the police are obligated to register an FIR under the appropriate sections of the Bharatiya Nyaya Sanhita (BNS). The investigation will be conducted as per the procedures laid down in the Bharatiya Nagarik Suraksha Sanhita (BNSS). They will collect evidence, record statements, and may arrest the accused if necessary.

FAQs people normally have

• What is the safest way to receive money?
  RTGS or NEFT transfer is the safest and most transparent method. A Demand Draft is also a secure option for the advance payment.
• Can I take the full amount in cash?
  No. Accepting ₹20,000 or more in cash for a property transaction is illegal and attracts a penalty equal to the amount accepted under the Income Tax Act.
• What if the buyer’s cheque bounces?
  A bounced cheque is a criminal offense under the Negotiable Instruments Act, 1881. You can send a legal notice and, if the payment is still not made, file a criminal case.
• Who pays for the stamp duty and registration?
  By convention, the buyer pays the stamp duty and registration charges, but this can be mutually agreed upon and should be specified in the Agreement to Sell.

What evidence is required?

To prove your case in a property payment dispute, you will need strong documentary evidence. The key documents are:

• The registered Agreement to Sell.
• The final registered Sale Deed, if executed.
• Proof of payments received (bank statements showing RTGS/NEFT credit, copy of Demand Draft).
• For criminal cases, the bounced cheque along with the bank’s return memo.
• Any written correspondence with the buyer, including emails, letters, or text messages.
• Identity proofs of both parties.
• Copy of the FIR and other police documents.

How long will the investigation take?

The duration of legal proceedings can vary significantly. A criminal investigation by the police under the BNSS can take several months, depending on the complexity of the fraud and the evidence available. After a chargesheet is filed, the court trial begins. A civil suit for recovery of money or specific performance of the contract is a lengthy process and can take several years to conclude in the Indian judicial system. There is no fixed timeline, and it depends on the specifics of the case and the court’s workload.

Advocate Sudhir Rao, Supreme Court of India