Taxability if sale consideration of land or building is below stamp duty value

In a property sale (land or building or both), the sale value is often shown below stamp duty value to evade tax. Anti-avoidance provisions exist in the Income-tax Act in order to bring to tax such transactions where the consideration for transfer of the property is less than the stamp duty value. The property transferred could either be stock-in-trade or capital asset.

Taxability in cases were properties are transferred below stamp duty value is summarized in the below table

In the hands of the SellerIn the hands of the Buyer
The stamp duty value would be considered as the sale consideration, if the stamp duty value exceeds 110% of the sale consideration.
 Resultant gains on transfer would be taxable as:
 - Capital gains, if the property was held as capital asset; or
- Business income, if the property was held as stock-in-trade.
If the difference between stamp duty value and actual consideration is more than the higher of Rs. 50,000 or 10% of consideration, then the difference is taxable as income from other sources.

Date of sale agreement is different from the date of registration

If the date of sale agreement is different from the date of registration, then the stamp duty value as on the date of sale agreement can be taken if: 

- at least a part of the consideration has been paid on or before the date of sale agreement; and 

- the consideration should have been paid by way of an account payee cheque or account payee bank draft or ECS through a bank account.

If the Taxpayer disputes the stamp duty value

If the Taxpayer disputes the stamp duty value and no appeal or revision or no reference has been made before any Authority, then the Assessing Officer could make reference to Valuation Officer to determine the stamp duty value. However, if the value as ascertained by the Valuation Officer exceeds the stamp duty value, then stamp duty value shall be considered as full value of consideration.

Whether the anti-avoidance provisions attract double taxation?

The above anti-avoidance provisions provide for deeming fiction of taxing the notional income in the case of transfer of property where the sale consideration is lower than the stamp duty value. However, the taxability applies in the hands of both the seller and the buyer resulting in double taxation. This double taxation is contrary to the well-established and well settled principles of law that ‘the same income cannot be taxed twice’. 

Disclaimer: The views / the analysis contained therein do not constitute a legal opinion and is not intended to be an advice. Readers of this document are advised to seek their own professional advice before taking any course of action or decision, based on this document.

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