InvestorQ : What is the tax treatment on the purchase/sale of a property below the Stamp Duty Value?
varsha Motwani made post

What is the tax treatment on the purchase/sale of a property below the Stamp Duty Value?

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Niharika Kamble answered.
9 months ago
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First of all, let’s begin with understanding the meaning of stamp duty value:

Every state government has a pre-decided minimum valuation on which Stamp Duty is supposed to be paid this pre-decided rate is referred to as circle rate or Stamp Duty Value. For every locality and region, circle rates differ according to the infrastructure and development in that particular area. Generally, when a property is sold it is above the circle rate.

Tax Treatment in the hands of the seller (Section 50C):

As per the provisions of the applicable section, if a property is sold below the circle rate it shall be deemed to be sold at the circle rate/ stamp duty value and therefore, any capital gain tax shall be levied at the same rate.
However, there are circumstances where the Fair Market Value of the property is genuinely lower than the Circle Rate, the assessing officer may request the valuation officer to conduct a valuation of the property. When the valuation is conducted by the Valuation Officer and he concludes that-

1. The valuation as ascertained by the Valuation Officer is lower than the circle rate, then the value so ascertained by the officer shall be deemed to be the value of the property.

2. The valuation as ascertained by the Valuation Officer is higher than the circle rate, then the circle rate shall be deemed to be the value for this purpose.

Tax Treatment in the hands of the buyer (Section 56(2)(x)):

If a buyer purchases the property for a price below the circle rate and the difference in “circle rate” and the “price at which the property has been purchased” is more than Rs. 50,000, any such difference shall be deemed to be the income of the purchaser and shall be charged as “income under head other sources”.

However, if the rate changes between the date of the agreement and the date of registration, the circle rate on the date of agreement shall be considered as the sale price. This exception is only applicable in cases where part/full consideration has been paid in any mode other than cash on or before the date of agreement of fixing consideration.
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