Section 50C was drafted into the ambit of income tax as a solution to the flurry of unaccounted money resulting out of property transactions. The provisions of the section apply to a land or building. In this article, we look at Section 50C of Income Tax Act in detail.

This section of The Income Tax Act prompts the utilization of value adopted by the Stamp Valuation Authority (SVA) for the purpose of calculating capital gains on property transaction. The value is considered to be a guideline to identify any undervaluation of land or building in sale agreement. If it is found that the gains received or claimed to be received by the seller is less than the value adopted by the authority, the value adopted by the SVA would be termed as the actual gains received or accrued to the seller. Hence, the valuation as per stamp valuation authority has always been considered as the capital gain, until Budget 2018 conveyed that no adjustments are to be made if the variation between stamp duty value and the sale consideration is confined to five percent of the sale consideration.

1. Stamp Value Authority

Stamp Value Authority (SVA) is the value adopted, assessed or considered assessable by any State Government authority for the payment of stamp duty.

2. When the Value of Valuation Officer is Higher than SVA

To keep the taxpaying seller at ease, the lower of the value between the one determined by the valuation officer and SVA will be considered as sale consideration for computing capital gain.

3. Tax Liability of Buyers

The buyer of a property will be taxed on the difference between the stamp duty value and the purchase value if the buyer is in the receiving end of such difference. For example, if the buyer is purchasing a property worth Rs.80 lakhs for a sum of Rs.50 lakhs; Rs30 lakhs would be taxed under the head ‘income from other sources’.