Section 50C : Stamp Duty Value vs. Capital Gains

Section 50C of the Income Tax Act 1961 is an anti‑tax‑evasion provision. It applies when you sell a capital asset—land, building, or both—and the declared sale consideration is lower than the government‑assessed stamp duty value (SDV).

In that case, the higher SDV becomes the deemed sale price, and capital gains are calculated on that amount, not on what you actually receive.

Why Does Section 50C Exist?

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People often underreport property sale values in sale deeds to reduce tax and stamp duty. Section 50C is designed to counter such practices by using the Stamp Duty Value as a benchmark for the property’s fair market value.

When Does Section 50C Apply?

The asset sold is a capital asset (not stock‑in‑trade).
The asset is land, a building, or both.
The property is transferred (sold) by the assessee.
The declared sale consideration is less than the SDV in the registered document.

Understanding Stamp Duty Value (SDV)

The Stamp Duty Value is the value assessed by the local Stamp Valuation Authority (SVA) for the purpose of levying stamp duty on real estate transactions. It is based on the circle rate/guideline value in the area where the property is located.

Capital‑Gains Calculation Under Section 50C

Let’s break it down with an example:

Particular	Amount (₹)
Declared Sale Consideration	50,00,000
Stamp Duty Value (SDV)	65,00,000
Indexed Cost of Acquisition	30,00,000

Since SDV exceeds sale price by > 10 %,

Capital Gains = 65,00,000 – 30,00,000 = 35,00,000

(not ₹20,00,000 based on actual sale price).

Safe‑Harbour Rule (10 % Tolerance)

If the difference between the actual sale price and SDV is not more than 10%, the declared sale price is accepted for capital gains.

Period	Tolerance Limit
Before AY 2021‑22	5 %
AY 2021‑22 onward	10 %

Example:

If Sale Price = ₹90,00,000 and SDV = ₹95,00,000
Difference = ₹5,00,000 → 5.56%, which is within 10%
So, ₹90 lakh will be considered as sale price (not ₹95 lakh)

Right to Dispute SDV (Reference to Valuation Officer):

If the taxpayer believes that the stamp duty value is higher than the fair market value of the property, they can request that the matter be referred to a Valuation Officer (VO) under Section 50C(2). If the VO determines a lower fair market value, that value will be used instead of the SDV.

Steps:

Declare in your income tax return that SDV is too high.
The Assessing Officer refers it to the Departmental Valuation Officer (DVO).
The DVO’s valuation becomes the basis for capital gains calculation.

Note: If the DVO’s valuation is higher than the SDV, the lower of the two (SDV or DVO’s value) is used.

Section 50C vs. Related Sections

Section	Applies To	Purpose
50C	Sale of capital assets (land/building)	Deems higher value for capital gains
43CA	Sale of stock‑in‑trade (builders)	Similar to 50C for business income
56 (2)(x)	Buyer purchases below SDV	Difference taxed as buyer’s income

Where Section 50C Does Not Apply

If the asset is not a capital asset (e.g., agricultural land in rural areas).

If the transfer is not by way of sale (e.g., gift or inheritance).

If stamp duty is not applicable (e.g., unregistered transactions—though other sections may apply).

If the property is stock-in-trade, then Section 43CA applies instead.

Summary – Quick Facts:

Topic	Details
Applicable on	Sale of land/building (capital asset)
Trigger	Declared sale price < Stamp Duty Value
Consequence	SDV deemed as sale consideration
Relief – Safe Harbour	SDV can be up to 10% higher than sale price
Option to challenge SDV	Yes – Refer to Valuation Officer (VO
Option to challenge SDV	Section 56(2)(x) – difference taxed as income

Summary :

Section 50C is a crucial provision that ensures property sellers do not understate sale prices to avoid taxes. It helps the Income Tax Department maintain transparency and fairness in property transactions.

If you’re planning to sell land or a building, always check the stamp duty value and be prepared for capital gains to be calculated on that amount, unless your sale price is within the safe harbour limit.

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FAQs

What triggers Section 50C of the Income‑tax Act?

Section 50C is triggered when the sale consideration declared for land, a building, or both is lower than the stamp duty value (SDV) assessed by the Stamp Valuation Authority on the date of transfer.

How much difference between sale price and SDV is allowed under the safe‑harbour rule?

From Assessment Year 2021‑22 onward, a tolerance of 10 % is permitted. If SDV is ≤ 110 % of the actual sale price, the declared price is accepted for capital‑gains purposes.

Can I challenge an inflated stamp duty value?

Yes. Under Section 50C(2), you may request that the Assessing Officer refer the valuation to a Departmental Valuation Officer (DVO). If the DVO’s valuation is lower than SDV, that lower figure is adopted.

Does Section 50C apply to agricultural land in rural areas?

No. Rural agricultural land is not considered a capital asset under the Income‑tax Act, so Section 50C does not apply.

Is indexation benefit still available when Section 50C substitutes SDV as sale value?

Absolutely. You may apply the Cost Inflation Index to your acquisition and improvement costs even after SDV replaces the declared consideration.

If I sell property below SDV, does the buyer also face tax implications?

Potentially, yes. Under Section 56(2)(x), the difference between SDV and the purchase price may be taxed as “income from other sources” in the buyer’s hands if it exceeds ₹50,000 and the 10 % tolerance.

Which date’s SDV is relevant when the agreement and registration dates differ?

If part or full consideration is received via banking channels on or before the agreement date, you may adopt the SDV applicable on the agreement date instead of the later registration date.

Can I still claim exemptions under Sections 54, 54F, or 54EC after Section 50C adjustment?

Yes. Once capital gains are recomputed using SDV, you can invest the resulting gains in a new residential property or specified bonds within the stipulated timelines to claim the respective exemptions.

Finance And Tax Guide

Section 50C – Tax on Sale of Immovable Property Based on Stamp Duty Value

Why Does Section 50C Exist?

When Does Section 50C Apply?

Understanding Stamp Duty Value (SDV)

Capital‑Gains Calculation Under Section 50C