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Tax on buying/selling of immovable property below stamp duty value

If any immovable property is sold below the stamp duty value (or circle rate) then such case will fall under Section 50C, Section 43CA, Section 56(2)(vii) and double taxation shall apply on the difference in the stamp duty value and transfer price.

Taxability in hand of seller

Section 50C – If a property is sold below the stamp duty value, the stamp duty value shall be the deemed value of consideration for the purpose of calculating capital gain. The original consideration shall not be consider for the purpose of capital gain in the hands of seller.

Section 43CA – A new section has been inserted from 01st April 2014 to cover the transfer of the immovable property if it is sold below the stamp duty value and such immovable property is treated as a stock in trade by assessee. As per this new section, stamp duty value shall be deemed value of the consideration and used for the purpose of computing profit and gains from transfer of such assets.

For example:- Mr. A purchase a property from Mr. B amounting to Rs 35,00,000. The stamp duty valuation of such property is Rs 45,00,000.

In the above example, Rs 45,00,000 shall be deemded consideration for calculating the capital gain in the hands of Mr. B (seller).

Taxability in hand of buyer

Section 56(2)(vii) – This section is applicable from 1st April 2014. If a property is purchased by any individual or HUF below the stamp duty value and if the difference between the stamp duty value and actual purchase price is more than Rs 50,000 then such difference is treated as a income in the hand of buyer and chargeable under head Income from Other Source.

Cost of acquisition on subsequent sale – The cost of acquisition in the hands of buyer in such cases would be stamp duty value (for future calculation) if such asset is treated as a capital asset. However, if assessee treat such immovable property as stock in trade then the original transfer price (not stampy duty value) shall be used for the purpose of calculating profit and gains from business on future sale.

Notes:

  1. This section apply to individual and HUF not to all assessee.
  2. Where the date of an agreement fixing the value of consideration for the transfer of the asset and the date of registration of the transfer of the asset are not same, the stamp duty value may be taken as on the date of the agreement for transfer and not as on the date of registration for such transfer. However, this exception shall apply only in those cases where amount of consideration or a part thereof for the transfer has been received by any mode other than cash on or before the date of the agreement.

For example:- Mr. A purchase a property from Mr. B amounting to Rs 35,00,000. The stamp duty valuation of such property is Rs 45,00,000.

In the above example, Rs 10,00,000 (45 Lakh – 35 Lakh) is taxable in the hands of Mr. A (buyer) as Income from Other Sources.

Reference to the valuation officer

Where assessee claims before any Assessing Officer that the stamp duty value exceeds the fair market value of the property as on the date of transfer and such stamp duty value has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer.

a) If the value assessed by Valuation officer is lower than the stamp duty value, the assessed value shall be consider as deemed sale price.

b) If the value assessed by Valuation officer is higher than the stamp duty value, the stamp duty value remain deemed sale price.

So, if the reference is made to the Valuation officer then it may be possible that the stamp duty value may decrease but it cannot be increased on the basis of the valuation officer.

Bare Act for Sections

Bare Act for Sections

50C. Special provision for full value of consideration in certain cases.- (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

(2) Without prejudice to the provisions of sub-section (1), where—

(a) the assessee claims before any Assessing Officer that the value adopted or assessed or assessable by the stamp valuation authority under sub-section

(1) exceeds the fair market value of the property as on the date of transfer;

(b) the value so adopted or assessed or assessable by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court,
the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modi-fications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.

Explanation 1.—For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).

Explanation 2.—For the purposes of this section, the expression “assessable” means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.

(3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.

43CA. Special provision for full value of consideration for transfer of assets other than capital assets in certain cases.(1) Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

(2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1).

(3) Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement.

(4) The provisions of sub-section (3) shall apply only in a case where the amount of consideration or a part thereof has been received by any mode other than cash on or before the date of agreement for transfer of the asset.

56(2)(vii). Purchase/Gift received by Individual or HUF – Where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—

(a) any sum of money, without consideration, the AGGREGATE value of which exceeds ` 50,000, the whole of the aggregate value of such sum;

(b) any immovable property, –
(i) without consideration, the stamp duty value of which exceeds ` 50,000, the stamp duty value of such property;
(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding ` 50,000, the stamp duty value of such property as exceeds such consideration;
Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause.
Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property. (Amended by Finance Act, 2013)

(c) any property, other than immovable property,—
(i) without consideration, the AGGREGATE fair market value of which exceeds ` 50,000, the whole of the aggregate fair market value of such property;
(ii) for a consideration which is less than the AGGREGATE fair market value of the property by an amount exceeding `50,000, the aggregate fair market value of such property as exceeds such consideration:
Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in section 50C(2), the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and section 155(15) shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections:

Provided further that this clause shall not apply to any sum of money or any property received (Referred as specified person)—
(i) from any relative; or
(ii) on the occasion of the marriage of the individual; or
(iii) under a will or by way of inheritance; or
(iv) in contemplation of death of the payer or donor, as the case may be; or
(v) from any local authority as defined in the Explanation to clause (20) of section 10; or
(vi) from any fund or foundation or university or other educational institution or hospital or
other medical institution or any trust or institution referred to in section 10(23C); or
(vii) from any trust or institution registered under section 12AA.

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