Black Money in Real Estate

How property deals in India historically involved an unrecorded cash component, why circle rates were set, and how rules have tried to reduce cash in property.

Real estate has long been a haven for black money.

Cash component

Buyers often paid part of the price in cash (“on-money”) to reduce registered value and stamp duty.

Circle rates

States set circle rates (minimum values) for property registration.

Rules

Buyers must deduct TDS on property above ₹50 lakh.
The Income Tax Act penalises cash receipts over ₹20,000 for property deals.
PAN is required.

Effects

RERA and digital records increased transparency.
Cash use fell, but hasn’t disappeared.

Economics

Cash dealings inflate prices and hide wealth.

The two prices

A flat is registered at a lower value while the buyer pays extra in cash, cutting stamp duty.

Thinking property prices are fully recorded

Cash components hid part of prices.

Key takeaways

Property deals often had cash components.
Circle rates set minimum values.
TDS and cash limits apply.
Transparency has improved.