Updated on: 13 Jun, 2020 02:23 AM

Contents

What is section 50C of 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. Section 50C is not applicable in case land or building or both are held as a stock.

When is section 50C of Income Tax Act applicable ?

Section 50C is applicable in given below conditions :

  • There is 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 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 105% 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 (5%variation) 102.5% 21,00,000
Full value of consideration will be Sale value  [since SDV is not more than 105% of sale value]
20,00,000

How is 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 agreement is different from stamp duty value on date of registration.In such a scenario, there are 2 possible cases :

Case 1 : Take stamp duty value on the date of agreement

Stamp duty value on the date of agreement should be taken provided :

  • 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 date of Agreement 25,00,000 26,00,000 22,00,000
Stamp duty value on date of Registration 28,50,000 30,50,000 28,50,000
Payment of consideration Before date of agreement After date of agreement Before 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 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 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 value adopted by SVA, then,FMV is considered as Sales Consideration.
  • FMV determined by Valuation Officer is higher than value adopted by SVA, than value assessed by SVA is considered as Sales Consideration.