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  7. Section 50C of Income Tax Act: Tax on Sale of Immovable Property

Section 50C of Income Tax Act: Importance of stamp duty value in case of Sale of Land, Building, Immovable Property

Updated on: 15 Apr, 2022 05:21 PM

Know the special provisions for the full value of consideration for calculation of tax.
Purchase or sale of land/building is a big decision for every person. Many times, we just ignore tax compliances for a speedy process which invites unnecessary problems in future. This section was introduced to ascertain that stamp duty on sale or purchase of land is paid on the correct value of the land or building.

Contents

What is Section 50C of the Income Tax Act?

Section 50C deals with the computation of capital gain on sale of land or building or both which is held as capital asset. As per this section, the value of sale consideration should not be less than the stamp duty value which is assessed by the Stamp Valuation Authority. However a Marginal relief of 10% variation is allowed by income tax department, this can be understood in the examples listed in below questions. Section 50C is not applicable in case land or building or both are held as a stock.

When is Section 50C of the Income Tax Act applicable?

Section 50C is applicable in given below conditions:

  • There is a transfer of land or building or both
  • which is held as capital asset
  • whether Long Term Capital Asset or Short Term Capital Asset
  • The asset can be depreciable or non-depreciable.

Section 50C is applicable

How is Capital Gain Calculated under Section 50C of the Income Tax Act?

Particular Amount
Full value of consideration: Sale value or stamp duty value (Higher) XXX
Less:- Expenditure in relation to  transfer (XXX)
Net Consideration XXX
Less: Cost of Acquisition (XXX)
Less: Cost of Improvement (XXX)
Capital Gain/loss XXX

However, where the Stamp duty value is not more than 110% of consideration, then sale consideration shall be treated as Full Value of Consideration

Example: If sale consideration is Rs. 20,00,000/-. In this case, stamp duty value assessed by authority is Rs. 20,50,000/-

Particulars Amount
Sale value 20,00,000
Stamp Duty Value 20,50,000
Percentage of SDV/Sale value Acceptable Value (10% variation is allowed) 102.5%
Full value of consideration will be Sale value [since SDV is not more than 110% of sale value] 20,00,000

NOTE:- If in case the sale value would have been 15lac i.e., variation greater then 10% from the stamp duty value then Full value of consideration in such case would have been 2050000.

How is the stamp duty value calculated under section 50C?

Stamp duty value is to be taken as assessed by the Stamp Valuation Authority. However, it is quite possible that stamp duty on the date of the agreement is different from stamp duty value on the date of registration. In such a scenario, there are 2 possible cases:

Case 1: Take stamp duty value on the date of agreement
  • Full or part of consideration has been received before the date of agreement and
  • Payment should be made through account payee cheque/draft [prescribed electronic mode]
Case 2 : Take stamp duty value on the date of registration
Particulars Situation 1 Situation 2 Situation 3
Stamp duty value on the date of Agreement 25,00,000 26,00,000 22,00,000
Stamp duty value on the date of Registration 28,50,000 30,50,000 28,50,000
Payment of consideration Before the date of agreement After the date of agreement Before the date of agreement
Mode of payment Cash A/c payee cheque A/c payee cheque
Stamp Duty value for the purpose of Section 50C 28,50,000 30,50,000 22,00,000

How stamp duty value is calculated when assessee disputes value adopted by stamp duty authority?

There may be the following scenarios when assessee disputes value adopted by stamp duty authority: adopted by stamp duty authority

Situation 1: Value assessed by SVA is not accepted by the assessee:
Where assessee does not accept the value adopted by SVA, then the value finally accepted for stamp duty purposes will be considered as sales consideration.
For example: Mahima does not accept the value adopted by SVA and files an appeal to the High Court under the Stamp Act, and then it gets reduced to INR 18,00,000, the sales consideration for the purposes of the capital gain will be INR 18,00,000.

Situation 2: Assessee claims that value adopted by SVA is more than FMV
Where assessee objects the value adopted by SVA, then A.O. is bound to refer the case to Valuation Officer. The fair market value will be assessed by Valuation Officer:

  • FMV determined by Valuation Officer is less than the value adopted by SVA, then, FMV is considered as Sales Consideration.
  • FMV determined by Valuation Officer is higher than the value adopted by SVA, then the value assessed by SVA is considered as Sales Consideration.
CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.

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