Section 56(2)(x) is one of the most impactful provisions for property buyers, gift recipients, and anyone receiving assets below market value.
While Section 43CA and 50C hit the seller, Section 56(2)(x) targets the buyer if they get the property for cheap or for free.
📘 What is Section 56(2)(x)?
Introduced to prevent tax evasion through gifts or undervalued transactions, Section 56(2)(x) applies when:
- A person receives any immovable property without consideration (i.e., as a gift), or
- Buys property for less than its Stamp Duty Value (SDV)
In these cases, the difference between the SDV and the actual purchase price is taxed as “Income from Other Sources” in the buyer’s hands.
📋 Conditions for Section 56(2)(x) to Apply:
| Condition | Rule |
| Buyer is an individual or HUF | Mostly applies to individuals |
| Buyer receives property as a gift | Entire SDV taxed if over ₹50,000 |
| Buyer purchases property below SDV | Difference taxed if it exceeds ₹50,000 and >10% |
| Property is land, building, or both | Only immovable property considered |
✅Safe Harbour – 10% Tolerance
| Situation | Taxable? |
| SDV is up to 10% higher | ❌ No tax |
| SDV exceeds sale price by >10% and >₹50,000 | ✅ Taxable |
| Gift value (SDV) > ₹50,000 | ✅ Entire value taxed |
🧮 Example 1: Under-Valued Purchase
- Property Purchase Price: ₹70 lakh
- Property Purchase Price: ₹70 lakh
- Difference = ₹10 lakh (14.28%)
✅ Difference > 10% and > ₹50,000 →
✅ The buyer must pay tax on ₹10 lakh as Income from Other Sources.
🧮 Example 2: Gifted Property
If you receive a property worth ₹25 lakh (based on SDV) as a gift from a non-relative,
✅ The entire ₹25 lakh is taxable in your hands.
👪 Exceptions: When Gifts are Not Taxable under Section 56(2)(x)
Section 56(2)(x) does not apply if you receive property from:
- Spouse
- Brother or sister (of self/spouse)
- Lineal ascendant or descendant
- In-laws (in specific cases)
- At the time of marriage
- Under a will or inheritance
- Under a will or inheritance
✅ These are tax-free gifts.
⚖️ Buyer Beware: It’s Not Just About Saving Money
If you’re buying a property at a deep discount (distress sale, auction, or family deal), check the SDV. If the gap exceeds the 10% threshold, you’ll need to pay tax on the difference.
📝Summary Table – Section 56(2)(x)
| Transaction Type | Tax Treatment (if over limits) |
| Gifted property | Entire SDV taxed |
| Property bought < SDV by >10% | Difference taxed |
| Received from relatives/marriage | Exempt |
| SDV difference ≤10% | No tax |
🔚 Final Thoughts on Section 56(2)(x)
Section 56(2)(x) is a powerful tool to tax undervalued deals and undisclosed income. Whether it’s a gift or a cheap deal, buyers must be aware of SDV limits — or face unexpected tax bills.
FAQs
What is Section 56(2)(x) of the Income Tax Act?
Section 56(2)(x) taxes a buyer if they receive immovable property (land or building) without consideration (as a gift) or purchase it for less than its Stamp Duty Value (SDV) beyond a certain threshold.
When does Section 56(2)(x) apply on property purchases?
It applies when the property is bought for less than the SDV, and the difference exceeds ₹50,000 and 10% of the purchase price.
Is there any tolerance limit under Section 56(2)(x)?
Yes, if the SDV is not more than 10% higher than the purchase price, there is no tax liability.
Are gifts from relatives taxable under Section 56(2)(x)?
No. Gifts received from specified relatives (like spouse, siblings, parents, children, etc.) are exempt from tax under Section 56(2)(x).
What happens if I buy a property in an auction at a lower price?
Even in distress sales or auctions, if the SDV exceeds the purchase price by more than 10% and ₹50,000, you must pay tax on the difference as “Income from Other Sources.”
How is the taxable amount calculated under Section 56(2)(x)?
The taxable amount is the difference between the Stamp Duty Value (SDV) and the actual purchase price if it crosses both the ₹50,000 threshold and the 10% margin.
Does Section 56(2)(x) apply to commercial properties?
Yes, it applies to all types of immovable properties — residential, commercial, or land.
What types of properties are covered under Section 56(2)(x)?
Only immovable properties — land, building, or both — are covered under this section.
Are gifts received under a will or inheritance taxable?
No, properties received under a will, inheritance, or through a trust or local authority are exempt from tax under Section 56(2)(x).
How can I avoid tax liability under Section 56(2)(x)?
Ensure that the property is purchased within 10% of its SDV, or that it is received from a relative or through exempted means (like marriage, will, or inheritance).