Please find attached a writeup on Sec 50C of the Income Tax Act, 1961 with the latest amendments of the Finance Act 2020. Sec 50C deals with the deemed income under the Income Tax Act in case of the difference between actual sale value and the defined circle rate value. This section applies only to capital gains and not to business assets such as closing stock.

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Section 50-C of the
Income Tax Act, 1961
S&A Knowledge Series
Prepared by Abhay Tripathi
Article Assistant at Seth & Associates,
Chartered Accountants
www.sethspro.com info@sethspro.com New Delhi | Lucknow | Coimbatore

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INTRODUCTION TO SEC 50C
In order to plug the prevailing black money in real estate transactions the government
vide finance Act 2002, introduced section 50C with effect from 1st July 2002. The
provisions of section 50C applies in case of transfer of land or building or both held as
capital asset. The section provides that where full value of consideration for transfer of
land or building or both is less than the stamp duty value of such land or building or both,
Stamp Duty Value (SDV) of such asset shall be deemed as full value of consideration for
the purposes of computation of capital gains (the section for real estate developers is
separate under Sec 43CA).
Example: Mr. A sold his land for Rs 45 lac for which the Stamp Duty Value (SDV) was Rs.
52 lacs. Thus, to compute the taxable value it shall be assumed that Rs. 52 lacs is the sale
price and not the actual transaction price of Rs. 45 lacs.
AMENDMENTS TO SEC 50C
Finance Act 2016
Section 50C was amended to provide that where the date of agreement fixing the amount
of consideration for the transfer of property and the date of registration are not the same,
SDV as on the date of the agreement may be taken for the purposes of computing capital
gain provided that amount of consideration or part thereof has been received by way of
an account payee cheque or account payee draft or by use of ECS services on or before
the date of agreement for transfer.
Example: Mr. A entered into an agreement for sale of his land for Rs. 50 lacs when the
SDV was Rs. 47 lacs. He also received a down payment account payee cheque for
transaction amounting to Rs. 5 lacs. However, on the actual registry date the SDV was
increased by the government to Rs. 55 lacs and the stamp duty was paid on that. Since
there was an agreement and an initial receipt of consideration from an account payee
cheque hence the SDV as on the down payment date would be applicable.

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Finance Act 2018
Section 50C was further amended to provide that the provisions of the said section shall
apply only where the SDV of the property exceeds 105% of the actual sale consideration.
Example: - Transaction price is Rs. 200 but the SDV is Rs. 210 then there would NO
implications under the said section since SDV doesn’t exceed 5% of transaction price.
Finance Act 2020
Section 50C has further been amended to provide that the threshold for the application
of this section shall be taken as 110% of sale consideration instead of 105% of sale
consideration as stated in Finance Act 2018 above.
SOLUTION FOR TRANSACTIONS BELOW SDV
In the recent past in order to garner more taxes from stamp duty the government has
been constantly increasing the circle rate of. Therefore, in case a person must do a
transaction below the declared stamp duty value due to prevalent market conditions then
he may do so and declare capital gains in their Income Tax return with the actual
transaction price. There would be a high probability that the case would be selected for
scrutiny and during the proceedings, the assessee may ask the assessing officer to refer
to the valuation officer (of the Income Tax office) for determining the true market value
since the stamp duty value does not reflect the actual market value. Further as a backup
the assessee may also keep some proof of other transactions in the vicinity and around
the same time to reflect the incorrect stamp duty and establish their transaction was at
true arm’s length price. Also, it may be considered that a valuation be done by any other
valuer (approved by the Income Tax office) suo moto by the assessee to be submitted
during the scrutiny.
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very frequent. The above is purely for academic reading and general awareness of the
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which requires a thorough examination of a particular situation.
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