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Sale less than Stamp duty value

Jatin Verma (CA) (21 Points)

04 February 2025

In case property is purchased for the amount of consideration which is less than SDV of the property and all the taxes,Tds has been paid according to SDV. Whether department can ask that why consideration is less than SDV?

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Rama chary Rachakonda (Master in Accounts & Lawyer email ID:ramachary64@gmail.com voice no:9989324294) (6304 Points)
Replied 04 February 2025

When a property is purchased for a consideration less than the Stamp Duty Value (SDV), the department might raise questions.

Here's what you should know: Relevant Provisions

1. *Section 50C of the Income Tax Act*: This section states that if the consideration for the transfer of a capital asset (in this case, the property) is less than the SDV, the SDV will be deemed to be the full value of the consideration.

2. *Section 56(2)(x) of the Income Tax Act*: This section provides that if any person receives any property for a consideration which is less than the SDV, the difference between the SDV and the consideration received will be taxed as income from other sources.

Department's Query The department may ask why the consideration is less than the SDV to verify the following:

1. *Undisclosed income*: The department may suspect that the difference between the SDV and the consideration is undisclosed income, which is taxable.

2. *Under-valuation*: The department may investigate whether the property has been under-valued to avoid paying adequate stamp duty and taxes.

Possible Responses To address the department's query, you may provide the following explanations:

1. *Market value*: Explain that the consideration is based on the market value of the property, which may be lower than the SDV.

2. *Distressed sale*: If the sale was a distressed sale (e.g., due to financial difficulties), provide evidence to support this claim.

3. *Family settlement*: If the property was transferred as part of a family settlement, provide documentation to support this claim.

Conclusion While the department may ask questions about the consideration being less than the SDV, it's essential to provide a clear and justified explanation.

Maintain proper documentation, including valuation reports, sale agreements, and other relevant records, to support your claims.

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