Due to the country's massive population, there is always a high demand for real estate, which typically outpaces supply. Due to the link between supply and demand and people's desire to possess more property, the value of real estate increases, which results in significant gains for the seller. Such gains are unlikely to be exempted from taxation.

What is Capital Gain?

For taxes purposes, the income tax law has broadly categorised incomes into 5 main groups. The category "Capital gains" is one of them.

Gains from the sale of any capital asset that the seller owns are considered capital gains. Real estate is one of the assets that is included in the definition of capital asset. Therefore, the owner must pay taxes on any profit made from the sale of their land or structure.

People began undervaluing properties in sale agreements and paying a large portion of the purchase price in cash to decrease the seller's tax liability, which resulted in a loss to the government and unreported black money in society. The Government created Section 50C by Finance Act, 2002 in order to stop such widespread real estate undervaluation and to bring unaccounted money into the tax net.

If the amount of sale consideration received or claimed to have been received by the seller on the sale of land, a building, or both is less than the value set by the stamp valuation authority (SVA), the actual sale consideration received by or accruing to the seller will be the amount set by the SVA. As a result, capital gain would be the valuation as determined by the stamp valuation authority less the cost or adjusted cost of acquisition.

Section 50C has been altered by Budget 2018 to state that no adjustments are necessary when the difference between the sale consideration and the stamp duty value is less than 5% of the selling consideration. This was put in place to lessen hardship in the event of legitimate real estate transfers.

The safe harbour rate, or the percentage that will be permitted to vary between the actual selling consideration value and the property's stamp value, was raised by the Finance Ministry from 10% to 20%.

Section 50C:

Special provision for full value of consideration

50C (1) -Where the consideration received or accruing as a result of transfer of a capital asset being land or building or both is less than the value adopted by stamp valuation authority for the purpose of payment of the stamp duty, then such value as adopted by the stamp valuation authority shall be deemed to be the full value for the purpose of calculating the capital gain under section 48.

50C (2) -Where the assessee claims before the Assessing Officer that the value as adopted, by the stamp valuation authority is more than the fair market value of the property as entered on the date of transfer and also that the stamp duty value adopted by stamp valuation authority has not been disputed in any appeal or revision, in such a case the assessing officer may refer the valuation of the capital asset to a valuation officer of he income tax department.

Note : The role of registered valuer in such cases is to estimate the fair market value of the asset as on the date of transfer.

50C (3) -On reference to the valuation officer, if the value ascertained by him exceeds the value adopted or assessed or assessable by the stamp valuation authority, then the value as adopted, assessed or assessable by the stamp valuation authority shall be taken as the full value of the consideration as a result of such transfer. If the valuation officer of the department estimates the value in between the value as entered in the transfer document and the stamp duty value, then such value as estimated by the valuation officer shall be taken as the full value. Value estimated by valuation officer at less than the value as entered in the transfer document is not considered at all.

Note :This is now amended by Finance Act 2018 - Where stamp duty value does not exceed 105% of the consideration declared or received, such consideration shall be taken as full value of consideration.

Section 50D:

Fair market value deemed to be the full value of consideration

Fair market value deemed to be the full value of consideration

Where the consideration received or accruing as a result of transfer of a capital asset is not ascertainable or cannot be determined, then the fair market value of the said asset on the date of transfer shall be deemed to be the full value.

Section 54:

Section 54: Capital gain on sale of a residential property not payable if used for buying a new residential house. In the case of an assessee being an individual or a Hindu Undivided family, if the capital gain arises from transfer of a long term capital asset being a residential house and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased or has within a period of three years constructed a new residential house, then the capital gain being the income of the year in which the transfer took place shall be dealt as under

i)If the amount of capital gain is greater than the cost of he new house so purchased or constructed, the difference between the amount of capital gain and the cost of the new house shall be charged to capital gain as the income of the previous year. The new house should not be disposed off within a period of three years from the date of its purchase or construction as the case may be. However if it is disposed off, then for the purpose of calculating capital gain involved as a penalty, the cost of acquisition of the new house shall be taken as NIL and the capital gain arising from this transfer within three years will always be a short term capital gain.

ii)If the amount of capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged. The new house should not be disposed off within a period of three years from its purchase or construction as the case may be. However if it is disposed off, then for the purpose of calculating capital gain involved, the cost of acquisition of the new house shall be reduced by the amount of capital gain and the capital gain arising from this transfer within three years will always be a short term capital gain.

iii)The amount of the capital gain is required to be utilized within a period of one year before the date on which the transfer of the original asset took place or before the date of furnishing the return of income (31st July) relevant to this transfer in buying a new residential house or constructing a new residential house. This utilization of the capital gain amount is to be furnished in the income tax return on the due date of filing of return under section 139 (1) of the income tax act. The unutilized amount of capital gain is required to be deposited in any bank or institution under the capital gain account and withdrawls and payments made as and when required under the scheme and utilized within the total period of 2 years or 3 years as the case may be from the date of transfer of original asset. The amount remaining unutilized within a period of two years or three years as the case may be shall be charged to capital gains under section 45 as the income of the previous year in which the period of two years or three years expires from the date of transfer of original asset.

iv)On investing in buying a new residential house, one should not have more than 2 residential houses including the new residential house.

Section 54 F:

Capital gain on transfer of a capital asset not being a residential house (plot or commercial property) not payable in case of investment in a residential house. In the case of an assessee being an individual or a Hindu Undivided family, if the capital gain arises from transfer of a long term capital asset not being a residential house and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased or has within a period of three years constructed a new residential house, then the capital gain being the income of the year in which the transfer took place shall be dealt as under:

a)If the cost of the new house so purchased or constructed is more than the net consideration (full value of the consideration as a result of the transfer of the asset less expenses incurred in connection with the transfer) in respect of the original asset, the whole of such capital gain shall not be charged under section 45.

b)If the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45.

Nothing contained in this sub section shall apply where the assessee:

i)Owns more than one residential house, other than the new house, on the date of transfer of the original asset; or

ii)Purchases any residential house, other than the new asset within a period of one year after the date of transfer of the original asset; or

iii)Constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset.

c)Where the assessee purchases within a period of one year or constructs a residential house other than the new asset within a period of three years after the date of transfer of the original asset, the amount of the capital gain arising from the transfer of original asset not charged under section 45 shall be deemed to be the income chargeable under the head capital gain relating to long term capital asset of the previous year in which such residential house is purchased or constructed.

d)The new house that has been purchased or constructed as the case may be, the assessee shall not dispose off this new asset within a period of three years of its purchase or construction. However where the new house is transferred within a period of three years from the date of its purchase or the date of construction as the case may be, the amount of the capital gain arising from the transfer of original asset not charged under section 45 shall be deemed to be the income chargeable under the head capital gain relating to long term capital asset of the previous year in which such new asset is transferred.

e)The amount of the net consideration is required to be utilized within a period of one year before the date on which the transfer of the original asset took place or before the date of furnishing the return of income (31st July) relevant to this transfer in buying a new residential house or constructing a new residential house. This utilization of the capital gain amount is to be furnished in the income tax return on the due date of filing of return under section 139 (1) of the income tax act. The unutilized amount of capital gain is required to be deposited in any bank or institution under the capital gain account and withdrawals and payments made as and when required under the scheme and utilized within the total period of 2 years or 3 years as the case may be from the date of transfer of original asset. The amount remaining unutilized within a period of two years or three years as the case may be shall be charged to capital gains under section 45 as the income of the previous year in which the period of two years or three years expires from the date of transfer of original asset.

f) On investing in buying a new residential house, one should not have more than 2 residential houses including the new residential house.

Section 54 B?

Section 54 B : Capital gain on transfer of Urban agriculture land not be charged in certain cases. Conditions under this section for claiming exemption are

a)The land which is being sold must have been used for agriculture purpose by the individual or Hindu undivided family or his parents for a period of two years from the date of transfer of this land.

b)Another land for agriculture purpose should be purchased within a period of two years from the date of transfer of the land.

c)The new agriculture land which is purchased to claim capital exemption should not be sold within a period of three years from the date of its purchase.

However where the new land is transferred within a period of three years from the date of its purchase, the amount of the capital gain arising from the transfer of original land not charged under section 45 shall be deemed to be the income chargeable under the head capital gain relating to short term capital asset of the previous year in which such new asset is transferred.

d)In case you are not able to purchase agriculture land before the date of furnishing of your income tax return, the amount of capital gain must be deposited before the date of filing of return in the capital gain deposit account of any public sector bank according to capital gain account scheme. Exemption can be claimed for the amount which is deposited.

e)If the amount which was deposited as per capital gain account scheme was not used for purchase of agriculture land, it shall be treated as the capital gain of the year in which the period of two years from the date of sell of land expires. Of course, in this case you can withdraw these amounts for any use you may want.

f)If the cost of the new agriculture land purchased is more than the amount of the capital gain then the entire amount of capital gain is not taxable.

g)If the cost of the new agriculture land purchased is less than the amount of capital gain, then the capital gain less cost of new agriculture land = Capital gain chargeable to tax.

Note : Under section 10 (37) of the income tax act, capital gain as compensation received on compulsory acquisition of urban agriculture land is exempted from capital gain tax.

Section 54 D:

Section 54 D: Capital gain on compulsory acquisitions of Industrial undertaking not to be charged in certain cases.

Where the capital gain arises by way of compulsory acquisition of a asset under any law being land or building or any right in land or building, forming part of an industrial undertaking belonging to the assessee which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee for the purposes of the business of the said undertaking, and the assessee has within a period of three years after that date purchased any other land or building or any right in any other land or building or constructed any other building for the purpose of shifting or re-establishing the said undertaking or setting up another industrial undertaking, then, instead of the capital gain being charged to income tax as the income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section.

i)If the amount of capital gain is greater than the cost of the land, building or right so purchased or the building so constructed, the difference between the amount of capital gain and the cost of the new asset shall be charged to capital gain as the income of the previous year. The new asset should not be disposed off within a period of three years from its purchase or construction as the case may be. However if it is disposed off, then for the purpose of calculating capital gain involved, the cost of acquisition of the new house shall be taken as nil.

ii)If the amount of capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged. Again, the new house should not be disposed off within a period of three years from its purchase or construction as the case may be. However if it is disposed off, then for the purpose of calculating capital gain involved, the cost of acquisition of the new asset shall be reduced by the amount of capital gain.

iii)The amount of the capital gain which is not utilized by the assessee for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing of such return in any bank or institution under the capital gain account scheme and withdrawls and payments made as and when required under the scheme and utilized within a period of 3 years from the date of transfer of original asset.

iv)The amount remaining unutilized within three years shall be charged to capital gains under section 45 as the income of the previous year in which the period of three years expires from the date of transfer of original asset.

Section 54 G:

Section 54 G : Capital gain on transfer of assets in case of shifting of industrial undertaking from urban areas to rural areas not to be charged.

Where the capital gain arises from the transfer of a capital asset, being machinery or plant or building or land or any rights in building or land used for the purposes of the business of an industrial undertaking situated in an urban area, effected in the course of or in the consequence of the shifting of such industrial undertaking to any rural area and the assessee has within a period of one year before or three years after the date on which transfer took place.

i)Purchased new machinery or plant for the purpose of business of the industrial undertaking in the area to which the said undertaking is shifted.

ii)Acquired building or land or constructed building for the purposes of his business in the said area.

iii)Shifted the original asset and transferred the establishment of such undertaking to such area and

iv)Incurred expenses on such other purpose as may be specified in the scheme framed by the central government for the purpose of this section.

Then, instead of capital gain being charged to income tax as income of the previous year in which the transfer took place, it shall be dealt in accordance with the following provisions.

a)If the amount of capital gain is greater than the cost and expenses incurred in relation to all or any of the purposes mentioned in clauses i) to iv) above, the difference between the amount of capital gain and the cost of the new asset shall be charged to capital gain as the income of the previous year.

The new asset should not be disposed off within a period of three years from its purchase, transfer or construction as the case may be. However if it is disposed off, then for the purpose of calculating capital gain involved, the cost of acquisition of the new house shall be taken as nil.

b)If the amount of capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged. Again, the new asset should not be disposed off within a period of three years from its purchase or construction as the case may be. However if it is disposed off, then for the purpose of calculating capital gain involved, the cost of acquisition of the new asset shall be reduced by the amount of capital gain.

c)The amount of the capital gain which is not utilized by the assessee towards the cost and expenses incurred in relation to any or all the purposes mentioned in clauses i) to iv) above within one year before the date on which the transfer of the original asset took place or which is not utilized by him for all or any of the purposes aforesaid before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing of such return in any bank or institution under the capital gain account scheme and withdrawals and payments made as and when required under the scheme and utilized within a period of 3 years from the date of transfer of original asset.

d)The amount remaining unutilized within three years shall be charged to capital gains under section 45 as the income of the previous year in which the period of three years expires from the date of transfer of original asset.

Section 54 GA:

Section 54 GA : Capital gain on transfer of assets in case of shifting of industrial undertaking from urban areas to any special economic zone not to be charged.

Where the capital gain arises from the transfer of a capital asset, being machinery or plant or building or land or any rights in building or land used for the purposes of the business of an industrial undertaking situated in an urban area, effected in the course of or in the consequence of the shifting of such industrial undertaking to any special economic zone and the assessee has within a period of one year before or three years after the date on which transfer took place.

i)Purchased new machinery or plant for the purpose of business of the industrial undertaking in the area to which the said undertaking is shifted.

ii)Acquired building or land or constructed building for the purposes of his business in the said area.

iii)Shifted the original asset and transferred the establishment of such undertaking to such area and

iv)Incurred expenses on such other purpose as may be specified in the scheme framed by the central government for the purpose of this section.

Then, instead of capital gain being charged to income tax as income of the previous year in which the transfer took place, it shall be dealt in accordance with the following provisions.

a) If the amount of capital gain is greater than the cost and expenses incurred in relation to all or any of the purposes mentioned in clauses i) to iv) above, the difference between the amount of capital gain and the cost of the new asset shall be charged to capital gain as the income of the previous year. The new asset should not be disposed off within a period of three years from its purchase, transfer or construction as the case may be. However if it is disposed off, then for the purpose of calculating capital gain involved, the cost of acquisition of the new house shall be taken as nil.

b) If the amount of capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged. Again, the new asset should not be disposed off within a period of three years from its purchase or construction as the case may be. However if it is disposed off, then for the purpose of calculating capital gain involved, the cost of acquisition of the new asset shall be reduced by the amount of capital gain.

c) The amount of the capital gain which is not utilized by the assessee towards the cost and expenses incurred in relation to any or all the purposes mentioned in clauses i) to iv) above within one year before the date on which the transfer of the original asset took place or which is not utilized by him for all or any of the purposes aforesaid before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing of such return in any bank or institution under the capital gain account scheme and withdrawals and payments made as and when required under the scheme and utilized within a period of 3 years from the date of transfer of original asset.

d) The amount remaining unutilized within three years shall be charged to capital gains under section 45 as the income of the previous year in which the period of three years expires from the date of transfer of original asset.

Section 54 EC:

Section 54 EC : Capital gain not to be charged on investment in certain bonds.

Capital gain arising from the transfer of any long term capital asset are exempt under section 54 EC if the assessee has within a period of 6 months after the due date of such transfer invested the capital gain in long term specified bonds as notified by the government for a minimum period of 5 years.

In case where the specified bond is transferred or converted into money at any time within a period of 5 years from the date of its acquisition, the amount of capital gain exempted under section 54 EC, shall be deemed to be the long term capital gain of the previous year in which the specified bond is transferred or converted into money.

If the assessee even takes a loan or advance on the security of such specified bonds, he shall be deemed to have converted such long term specified bonds into money on the date on which such loan or advance is taken. These specified bonds are usually issued by RURAL ELECTRIFICATION CORPORATION (REC) and NATIONAL HIGHWAY AUTHORITY OF INDIA (NHAI) and the interest rate offered is about 6%. Tax on the interest earned is also liable to be paid as the interest is not tax free.

Capital gain shall be exempt to the extent it is invested in the long term specified bonds (subject to a maximum limit of 50 lacks) within a period of 6 months from the date of such transfer.

Note: Budget 2014 has introduced an important amendment to section 54 EC that the investment made by an assessee out of the capital gain arising from the transfer of one or more asset or assets and invested during the financial year in which the transfer of the asset / assets has taken place and in the subsequent financial year taken together shall not exceed 50 lacks.

Note: Budget of 2018 has introduced an amendment that the bonds shall not be sold before 5 years from the date of purchase with effect from 01.04.2018.

The earlier period of holding the bonds was 3 years. Also the exemption shall be allowed on the sale of land and building only. Earlier it was allowed to be claimed on the sale of any asset.

Section 54 H:

Section 54 H : Extension of time for acquiring new asset or depositing or investing amount of capital gain in view of compulsory acquisition.

Not with standing anything contained in sections 54, 54 B, 54 D, 54 EC and 54 F where the transfer of original asset is by way of compulsory acquisition under any law and the amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period for acquiring the new asset by the assessee referred to in those sections or as the case may be, the period available to the assessee under those sections for depositing or investing the amount of capital gain in relation to such compensation as is not received on the date of transfer, shall be reckoned from the date of receipt of such compensation.

Section 55:

Meaning of ‘adjusted’, “cost of improvement” and “cost of acquisition” “cost of any acquisition” to capital asset:

Where asset became property of assessee before 01.04.2001, means the cost of acquisition to the assessee or FMV of the asset on 01.04.2001, at the option of the assessee.

“cost of any improvement” to capital asset: All expenditure of a capital nature incurred in making any additions or alterations to the capital asset by the previous owner or assessee after it became his property.

Note: The role of registered valuer in such cases is to estimate the fair market value of the asset as on 01.04.2001 and of the improvements as at the time when executed.

Section 55A:

Reference to valuation officer of the department To ascertain the fair market value of a capital asset, the assessing officer may refer the valuation of a capital asset to a valuation officer if the assessing officer is of the view that the fair market value of the asset is more than the value as claimed by the assessee.

What is capital asset?

Land, building, house property, urban agricultural lands, jewellery, archeological collection, drawings, paintings, scultpures, works of art are called as capital assets.

Which cannot be considered as capital asset?

• Movable properties,
• Furniture,
• Rural agricultural lands are not capital assets.

What is sale consideration in the hands of the seller?

The amount received by the seller from the buyer towards the sale of his capital asset is called sale consideration in general.

While selling his capital asset, the permissible expenses that can be deducted from the sale consideration in the hands of the seller are:

• Brokerage paid or Commission paid
• Stamp duty if paid by the seller
• Registration expenses if borne by the seller
• Travelling expenses borne by the seller
• Legal expenses connected with the transfer borne by the seller

What is cost of acquisition?

It is the amount spent by the assessee at the time of purchase of the said asset. The stamp duty paid, registration expenses, brokerage paid and any amount spent legally for the purchase of the said asset can also be added to arrive at the total cost of acquisition.

What is cost of improvement?

After acquiring the property, the assessee might have subsequently carried out certain improvements like:

• Further construction of upper floors
• Additional water supply arrangements
• Additional drainage arrangements
• Compound wall
• Wardrobes, show cases
• Modular kitchen, cupboard & any additional works

The amount spent for these type of works can be included in the category of cost of improvement.

What is Cost inflation index? Who is prescribing it?

Cost inflation index is a measure of inflation which is used to calculate the long term capital gains. It denotes proportional increase every year. It is prescribed by CBDT, Ministry of finance, department of revenue.

Capital gain is to be paid by the buyer or seller?

The assessee who is the seller has to pay the capital gains.

Capital gain is not applicable? (Section 47) in:

• 1. Transfer in the case of
  
  • Gift or
  • WILL or
  • Inheritance or
  • Irrevocable trust
• 2. Distribution of capital assets in the case of partition of a Hindu Undivided Family (HUF).

What are the exemptions on capital gains?

a. Section 54 & 54 F-Profit / gains used for purchase of new residence.

b. Section 54 B-Exemption from long term capital gain in urban agricultural land.

c. Section 54 D-Compulsory acquisition of industrial undertaking.

d. Section 54 G-Transfer of industry from urban to rural area.

e. Section 54 GA-Transfer of industry from urban area to SEZ

f. Section 54 EC-Investment in Bonds.

When the property was acquired in 1998, it was an agricultural land in a village area. Now it is included by the urban development authority within city corporation in residential zone. Whether the date of acquisition (1998) or the present status has to be considered for capital gain purpose?

The date of acquisition (1998) as agricultural land alone will be considered for capital gain purpose. The present status on the sale date need not be considered,
for taxation purpose. In case of splitting the land in piece-meal basis for residential / commercial, the expenditure incurred for is to be treated as improvement cost from the old status to new status.

‘Cost of acquisition’ for subsequently converted Non - Agricultural land CBDT : Only during the period between 1st August 1969, when instruction no. 90 of CBDT was issued till 23rd September 1971.

When this instruction was withdrawn, cost of acquisition for agricultural land had to be determined on the basis of the value as estimated on the date of conversion of agricultural land into non-agricultural land.

After instruction no. 90 was expressly withdrawn on 23.09.1971: till today, now the cost of acquisition is considered as the cost to previous owner irespective of the fact that the asset on the relevant date of acquisition fell within the ambit of definition of capital asset or not. Therefore, such land should be valued as an agricultural land as on the relevant date of 01.04.1981, and conversion charges paid to authority would be allowed as improvement in the year when it is converted to non-agricultural land.

In B.N. Vyas vs. C.I.T. (Gujarat High Court, 2003) it was held that: In order to attract provisions of section 49, it is not necessary that the capital asset which is sold must be a capital asset as defined in section 2 (14) at time when it was acquired.

C.I.T. vs. Vishwanath (Allahabad High Court, 1992): Section 48 does not envisage that the capital asset transferred must also be a capital asset on the date of acquisition besides its being capital asset on the date of its transfer.

Prakashbhai J. Pandya vs. I.T.O., Baroda (ITAT, Ahemdabad, 2013) Inherited agricultural land converted to NA and sold in 2005. As on 01.04.1981, it has to be valued as Agricultural Land and Non Agricultural conversion charges to be considered as cost of improvement to title, indexed appropriately.

What are the amendments in the budget 2020 with regard to the definition of fair market value?

The definition of Fair market value as per Amendment in Budget 2020 In section 55 of the Income-tax Act, in sub-section (2), in clause (b), after sub-clause (ii), the following shall be inserted with effect from the 1st day of April, 2021, namely : ‘Provided that in case of a capital asset referred to in sub-clauses (i) and (ii), being land or building or both, the fair market value of such asset on the 1st day of April, 2001 for the purposes of the said sub-clauses shall not exceed the stamp duty value, wherever available, of such asset as on the 1st day of April, 2001.

Explanation : For the purposes of this proviso, “stamp duty value” means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property’

Earlier, our valuation for capital gains was only by computation of fair market value of the property on transfer of property as on either 01.04.1981 or 01.04.2001. With due amendments and insertion of new sections in the Income Tax Act, our scope of capital gain valuation have expanded in numerous ways.

Getting the guideline value as on 01.04.1981 was a cumbersome process for the Registered Valuers. This made the Registered Valuers to avoid the capital gain cases. The amendment in the Act made in 2017, changing the base year from 01.04.1981 to 01.04.2001, paved the way for the Registered Valuers, in taking up the capital gain assignments.

Previously irrespective of the stamp duty value, the property was sold with less sale consideration value. In consequence to this aspect, many Assessee were subject to pay more capital gain. In many capital gain cases, the Assessee were depending onthe fair market value derived by the Income Tax department valuation cell. Before Section 50 C was inserted in the Income Tax Act, many Registered Valuers could not survive with their profession in capital gain assignments due to this.

After insertion of Section 50 C in the Income Tax Act in 2004, the scope has widely enhanced for Registered Valuers. In Section 50C, it has been stated that, though, only stamp duty value forms the basis of computation of capital gain, the Assessee is empowered to contest if the stamp duty value is more. So, this section gives several opportunities for the Registered Valuer.

The insertion of 43 CA of the Income Tax Act, enlarged the exposure in capital gain cases for the Registered Valuer. Before registration of sale, the Registered Valuer will be directed by the client, to work out the probable stamp duty value based on the registration department ready reckoner for both land and building and based on that value the Assessee can fix the sale consideration amount to be recorded in the transfer document to be registered.

And, also, Section 45 (5A) of the Income Tax Act is for joint venture agreement in promotion of high rise structures like apartments, commercial complex and malls etc. Earlier, Capital gain is chargeable when any rights are handed over to the developer for development of a project and even though the legal title is not transferred. In such scenario, joint venture agreement between the owner and the developer triggers capital gain. The Assessee is liable to pay for the capital gain, on the date of joint venture agreement.

Now, the insertion of Section 45 (5A) of the Income Tax Act, changed the scenario. To minimize the hardship faced by the owner, this new sub section 5A in section 45, was introduced with effect from 01.04.2017, so as to provide that in case of the Assessee who enters in to an agreement of development of the project, the capital gain shall be chargeable to income tax of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority.

Income Tax Act Sections (Capital Gains):

• Section 43CA Finance act of 2013
• Section 45 Definition of capital gain
• Section 45 (5A) Joint Venture Agreement
• Section 47 Transactions not regarded as transfer
• Section 48 Mode of computation for Long / Short Term Capital Gain
• Section 49 Cost with reference to certain modes of acquisition
• Section 50 Computation of capital gain in case of depreciable assets, slump sales
• Section 50C Full value of consideration
• Section 50D Fair Market Value (FMV).
• Section 54 & 54F Exemptions - Profit / gains used for purchase of new residence
• Section 54B Exemption from LTCG in urban agriculture land
• Section 54D Exemptions - Compulsory acquisition of industrial undertaking
• Section 54G Exemptions -Transfer of industry from urban to rural area
• Section 54GA Exemptions Transfer of industry from urban area to SEZ
• Section 54EC Exemptions - Investment in Bonds
• Section 54EE Exemptions - Investment in in the long-term specified assets
• Section 54F Exemptions -Acquisition
• Section 54H Exemptions -Time extension for acquiring or depositing capital gains in compulsory acquisition.

Capital gains Account Scheme (CGAS) 1988.

• Section 55 FMV definition, CII base year shift, holding period
• Section 55A Reference to valuation officer
• Section 56(2) (vii) (b) & (x) Buyer to be taxed

Section 50C:

Section 50C of Income tax act is the attempt to tackle under valuation in real estate transactions. It is related to computation of income for capital gains purposes.

Section 50C was introduced was introduced by the finance Act 2002 so as to cover all the transactions effective from 01.04.2003.

Section 50C states that where the consideration received on transfer of a capital asset (being land or building or both), is less than the value adopted by any authority of a state government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall [for the purpose of capital gains (Section 48)] be deemed to be the full value of the consideration.