Tax Safeguards for Property Transactions

What every Seller and Buyer of an Immovable Property need to know before entering in a Deal

- JIGAR MUKESH PATEL

Section 50C of the Income-tax Act is a special provision that addresses the issue of under-reporting of sale consideration in real estate transactions, with a view to evade capital gains tax.

Section 50C provides that when a taxpayer sells a capital asset, being land or building or both and the sale consideration is less than the value adopted by the Stamp Valuation Authority, i.e., Stamp Duty Value (SDV) or Jantri value, then the SDV shall be deemed to be the full value of consideration for purposes of computing capital gains.

What is Stamp Duty Value?

SDV or Jantri Value is the minimum value of an immovable property, as determined by the State Government's Stamp Valuation Authority for purposes of registering transfer of such property.

Safe Harbour Provision by way of a Special Concession

With a view to provide relief to taxpayers for any minor discrepancies in value, a safe harbour provision has been inbuilt in Section 50C, which provides that the deeming provisions of this section shall not be invoked if the SDV does not exceed 110% of the sale consideration.