Deemed Consideration on Transfer of Land or Buildings: Sections 50C and 43CA
This article covers how Section 50C and Section 43CA of the Income-tax Act, 1961 substitute the stamp duty value for a lower actual consideration on a transfer of land or buildings, and how the 110% margin, the agreement-date rule and a reference to the Valuation Officer affect the figure used.
It matters at the stage of preparing a computation or a return, because the substituted value changes capital gains or business profits even when the money received is lower, and the reliefs available depend on evidence that must be in hand before filing.
Which section applies
The characterisation of the property decides the section:
Section 50Capplies to the transfer of land, a building or both held as a capital asset.Section 43CAapplies where they are held otherwise than as a capital asset, for example a developer's stock-in-trade.
Section 50C
Section 50C was inserted by the Finance Act, 2002 with effect from 1 April 2003. Where the consideration is less than the value adopted, assessed or assessable by the stamp valuation authority, that value is generally deemed to be the full value of consideration for computing capital gains under Section 48. The provision replaces a figure within the computation. It does not itself fix the taxable gain, and indexation, exemptions and other reliefs still operate in the ordinary way.
Three features qualify the basic rule.