Section 50C of Income Tax Act, 1961

1. Determination of full value of consideration

Sub section (1) of the section 50C provides that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value of adopted or assessed or assessable by any authority of State Govt. for the purpose of payment of Stamp duty in respect of such transfer, the value of adopted or assessed or assessable shall be deemed to be full value of the consideration received or accruing as a result of such transfer. Therefore, if the value adopted or assessed or assessable for stamp duty purposes is more than the consideration returned by the assessee then the value adopted or assessed or assessable for stamp duty purposes will be deemed as full value of consideration.

Section 50C of income tax act 1961 introduced vide Finance Act. 2002 w.e.f. 01.04.2003, which prescribes similar provisions in the case of transfer of land or building or both held in the nature of ‘Capital Assets’.  ( from assessment year 2003-2004)

The Finance Act, 2018 has provided relief to assesses in the sense that where the value adopted or assessed or assessable by the authority for the purposes of payment of stamp duty does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profit and gains from transfer of such asset, be deemed to be the full value of the consideration. The amendment is effective from the assessment year 2019-20.

Common point-

1. If sales consideration is less than SDV, than SDV will be full value of Consideration (FVOC).

2. However if SDV does not more than 105% of consideration than SC will be FVOC.

The Finance act, 2020 has amended proviso to section  43CA(1) and also the third proviso to section 50C(1) from the assessment year 2021-22 so as to enhance the tolerance band from 5 per cent to 10 per cent. Therefore, where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed on hundred and ten per cent of consideration received or accruing as a result of the transfer,then consideration so received or accruing as a result of the transfer shall,for the purposes of computing profit and gains or capital gains from transfer of such asset, be deemed to be full value of the consideration. 

This amendment is effective from the assessment year 2021-22.

Common point-

1. If sales consideration is less than SDV, than SDV will be full value of Consideration (FVOC).

2. However if SDV does not more than 110% of consideration than SC will be FVOC.

(i) Provisions’ illustrated

Transaction not registered before stamp authority:-

Section 50C further provides that where the consideration received or accruing as a result of transfer of a capital assets, being land or building or both is less than the value adopted or assessed or assessable by an authority of a state Govt. for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration received or accruing as a result of such transfer for computing capital gain.

This amendment has taken effect from 01.10.2009 and shall accordingly apply in relation to transaction undertaken on or after such date.

Therefore from 01.10.2009 section 50C applies also to transaction not registered with stamp duty authorities.

Taking stamp value on date of agreement as full value of consideration:-

The Finance act 2016 has inserted to two provisos to section 50C(1) effective from the assessment year 2017-2018 so as to provide that:

(a) where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of capital assets are not the same, the value adopted or assessed or assessable by stamp valuation authority  on the date of agreement may be taken for the purpose of computing full value of consideration for such transfer.

(b) it is provided further that the first proviso shall apply only in a case where the amount of consideration,or  a part thereof, has been received by way of an account payee cheque or  account payee bank draft or by use of electronic clearing system through such other electronic mode as may be prescribed ,effective from assessment year 2020-21,on or before the date of the agreement for transfer.

Different situations identified and illustrated as under :

Situation 1:

Mr. X enter into an agreement for transfer of land on 01.07.2019. The consideration of transfer is determined at Rs. 55 Lakh. Mr X receive Rs. 5 Lakh by cheque as advance toward the deal on 30.06.2019. The stamp value as on 01.07.2019 is Rs. 60 Lakh. for the concerned property.

The transaction is finally registered on 19.09.2019 and on date stamp value of property is Rs. 75 Lakh. Now which value will be taken as consideration for transfer in terms of section 50C ?

Applicability of section 50C :

First proviso of section 50C(1) provides that where the date of agreement fixing the value of consideration for transfer of the assets and the date of registration of such transfer of asset not the same, then the stamp value may be taken as the value adopted or assessed or assessable by any authority of a state Govt. for the purpose of payment of stamp duty in respect of such transfer on the date of agreement. Section provision to section 50C(1) provides that the provision of first proviso to section 50C(1) shall apply only in  case where the amount of consideration or a part thereof has been received by way of an account payee cheque or account payee bank draft of use of electronic clearing system through a bank account on or before the date of the agreement for transfer of the asset. In view of above the consideration for transfer will be taken at Rs 60 Lakh in case being the stamp value on date of agreement as condition of both the provisos to section 50C(1) are satisfied.