Valuation for Capital Gains and Stamp Duty
Sell below stamp duty value and the tax law may use the stamp duty value instead. The new Act renumbered every rule.
When land or a building is sold for less than the value the state adopts for stamp duty, income-tax law can ignore the agreed price and tax the seller, and sometimes the buyer, on the stamp duty value instead. A registered valuer's report is the usual way to show that the stamp duty value is higher than what the property is really worth.
The Income-tax Act, 2025 came into force on 1 April 2026 and renumbered every one of these rules. The Phase 6 exam reads law as on 30 June 2026, so it tests the 2025 Act; transfers made before 1 April 2026 are still assessed under the 1961 Act. Learn both numbers.
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Old and New Section Numbers
Stamp duty value as full consideration for a capital asset (land or building)
Earlier: Income-tax Act, 1961
s.50C
Current: Income-tax Act, 2025
s.78
Same rule for land or building held as stock-in-trade
Earlier: Income-tax Act, 1961
s.43CA
Current: Income-tax Act, 2025
s.53
Buyer taxed on the shortfall below stamp duty value
Earlier: Income-tax Act, 1961
s.56(2)(x)
Current: Income-tax Act, 2025
s.92(2)(m)(ii)
Reference to a Valuation Officer
Earlier: Income-tax Act, 1961
s.55A
Current: Income-tax Act, 2025
s.91
Fair market value on 1 April 2001 as cost, capped at stamp duty value on that date
Earlier: Income-tax Act, 1961
s.55(2)(b)
Current: Income-tax Act, 2025
s.90(9) and (10)
| Rule | Earlier: Income-tax Act, 1961 | Current: Income-tax Act, 2025 |
|---|---|---|
| Stamp duty value as full consideration for a capital asset (land or building) | s.50C | s.78 |
| Same rule for land or building held as stock-in-trade | s.43CA | s.53 |
| Buyer taxed on the shortfall below stamp duty value | s.56(2)(x) | s.92(2)(m)(ii) |
| Reference to a Valuation Officer | s.55A | s.91 |
| Fair market value on 1 April 2001 as cost, capped at stamp duty value on that date | s.55(2)(b) | s.90(9) and (10) |
How the Seller's Rule Works (s.78, Old s.50C)
- 1
Compare price with stamp duty value
Stamp duty value is the value adopted, assessed or assessable by a government authority for stamp duty on the property (s.2(105)).
- 2
Apply the 110% tolerance
If the stamp duty value does not exceed 110% of the consideration, the actual consideration stands.
- 3
Otherwise substitute
If it exceeds 110%, the stamp duty value is deemed the full value of consideration for computing capital gains.
- 4
Use the agreement date where allowed
If the agreement and registration dates differ, the stamp duty value on the agreement date may be used, provided part or all of the price was paid by a specified banking or online mode on or before that date.
- 5
Dispute through a Valuation Officer
If the seller claims the stamp duty value exceeds fair market value and has not disputed it before another authority, the Assessing Officer may refer it to a Valuation Officer. If the Valuation Officer's figure is higher than the stamp duty value, the stamp duty value is used.
Worked Example: Seller and Buyer
Illustrative figures. A Nashik plot is sold for ₹1,00,00,000.
A
Stamp duty value
₹1,08,00,000
Seller (s.78)
Within 110%: ₹1,00,00,000 is the consideration.
Buyer (s.92(2)(m))
Excess ₹8,00,000 is below the higher of ₹50,000 and 10% (₹10,00,000): nothing taxed.
B
Stamp duty value
₹1,15,00,000
Seller (s.78)
Above 110%: ₹1,15,00,000 is deemed the consideration.
Buyer (s.92(2)(m))
Excess ₹15,00,000 exceeds ₹10,00,000: ₹15,00,000 taxed as income from other sources.
| Case | Stamp duty value | Seller (s.78) | Buyer (s.92(2)(m)) |
|---|---|---|---|
| A | ₹1,08,00,000 | Within 110%: ₹1,00,00,000 is the consideration. | Excess ₹8,00,000 is below the higher of ₹50,000 and 10% (₹10,00,000): nothing taxed. |
| B | ₹1,15,00,000 | Above 110%: ₹1,15,00,000 is deemed the consideration. | Excess ₹15,00,000 exceeds ₹10,00,000: ₹15,00,000 taxed as income from other sources. |
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Where the Registered Valuer Fits
- check_circleSupporting a claim that stamp duty value exceeds fair market value, which is the trigger for a reference to the Valuation Officer under s.78(2).
- check_circleValuing pre-2001 land or buildings at 1 April 2001 for cost of acquisition; the 2025 Act caps that value at the stamp duty value on that date (s.90(10)).
- check_circleUnder s.91(1)(a), the Assessing Officer may refer a value claimed on a registered valuer's estimate to a Valuation Officer if it seems at variance with fair market value. A report that cannot stand that scrutiny is a liability.
- check_circleStamp duty disputes: the stamp duty value itself is fixed under state stamp law, which has its own route for referring an undervalued instrument to the Collector and appealing the result. A valuer's report is evidence in that process too.
How the Valuation Examination Tests This
Expect a numerical question: price, stamp duty value, which figure is the full value of consideration. The traps are the direction of the test (110% of the consideration, not 90% of the stamp duty value), forgetting that the buyer's threshold is the higher of ₹50,000 and 10%, and quoting the 1961 section numbers when the question is framed under the 2025 Act.
FAQs
What replaced section 50C in the new Income-tax Act?expand_more
Section 78 of the Income-tax Act, 2025, in force from 1 April 2026. It keeps the 110% tolerance and the agreement-date rule.
When is stamp duty value taken as the sale price for capital gains?expand_more
When the stamp duty value of land or a building is more than 110% of the actual consideration. Up to 110%, the actual consideration is used.
Can the seller challenge the stamp duty value?expand_more
Yes. If the seller claims the stamp duty value exceeds fair market value and has not disputed it before another authority, the Assessing Officer may refer the valuation to a Valuation Officer. A registered valuer's report usually supports the claim.
Is the buyer taxed if they buy below stamp duty value?expand_more
Yes, if the stamp duty value exceeds the price by more than the higher of ₹50,000 and 10% of the price; the whole excess is then taxed as income from other sources (s.92(2)(m) of the 2025 Act, old s.56(2)(x)).
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