Section 50C of ITA, 1961 : Section 50C: Special Provision For Full Value Of Consideration In Certain Cases

Explanation using Example

Example Application of Section 50C of The Income-tax Act, 1961:

Mr. Sharma decides to sell his apartment to Mr. Gupta for Rs. 50 lakhs. They agree on the price and proceed with the sale. However, when Mr. Sharma goes to pay the stamp duty, the Stamp Valuation Authority of the state government assesses the value of the apartment at Rs. 60 lakhs, which is higher than the sale price.

According to Section 50C of the Income-tax Act, for the purpose of calculating capital gains tax, the value assessed by the Stamp Valuation Authority (Rs. 60 lakhs) will be considered as the sale consideration instead of the actual sale price (Rs. 50 lakhs) because it is higher.

However, if Mr. Sharma can prove that the fair market value of the property is indeed closer to the sale price and not the value assessed by the Stamp Valuation Authority, he may challenge this valuation. If the Assessing Officer finds merit in his claim, a Valuation Officer may be appointed to determine the fair market value of the apartment.

If the Valuation Officer's assessed value is still higher than Rs. 50 lakhs but does not exceed 105% of the actual sale price (i.e., does not exceed Rs. 52.5 lakhs), then for capital gains computation, the actual sale price (Rs. 50 lakhs) will be accepted as the full value of consideration.