Section 78 — Stamp Duty Value as Deemed FVOC | ITA 2025

Section 78 — - STAMP DUTY VALUE AS DEEMED FVOC

Section 78 is the substantive equivalent of 1961 s. 50C -- the ANTI-UNDERVALUATION provision for LAND / BUILDING transfers. Where consideration received is LESS THAN STAMP DUTY VALUE (SDV), the SDV is deemed to be FVOC for s. 72 computation. The provision targets common practice of cash-on-side under-pricing in real-estate transactions. THREE relief mechanisms: (i) AGREEMENT-DATE SDV election if agreement-date and registration-date differ AND part-consideration received via banking channel by agreement-date; (ii) 110% SAFE HARBOUR -- if SDV does not exceed 110% of consideration, actual consideration is FVOC (FA 2020 enhancement from 105%); (iii) DVO REFERENCE -- assessee can challenge SDV by demonstrating it exceeds FMV. Critical practical provision -- applies to virtually every property transfer; circle-rate-vs-market-rate discrepancy in metro / Tier-II cities common.

Statutory text — Income-tax Act, 2025

Marginal note -- Special provision for full value of consideration in certain cases

(1) If the consideration received or accruing from the transfer of a capital asset, being land or building or both, is less than the stamp duty value, then, for the purposes of section 72, the stamp duty value shall be deemed to be the full value of the consideration received or accruing as a result of such transfer, subject to the following:—

(a) the stamp duty value on the date of agreement may be taken as the full value of consideration, if—

(i) the date of the agreement fixing the consideration and the date of registration for the transfer of the capital asset are not the same; and

(ii) part or full consideration is received on or before the date of the agreement in “specified banking or online mode” as defined in section 66(32);

(b) if the stamp duty value does not exceed 110% of the consideration recei- ved or accruing from such transfer, such consideration shall be deemed to be the full value of the consideration for section 72.

(2) Without prejudice to the provisions of sub-section (1), the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer, and the provisions of section 269(3) to (8), shall, with necessary modifications, apply in relation to such reference, where—

(a) the assessee claims that the stamp duty value exceeds the fair market value of the property as on the date of transfer; and

(b) the stamp duty value has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court.

(3) If the value determined by the Valuation Officer on a reference made under sub-section (2) exceeds the stamp duty value, such stamp duty value shall be taken as the full value of consideration.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 78	INCOME-TAX ACT, 1961 -- s. 50C
Sub-s. (1) -- SDV as deemed FVOC for land/building	1961 s. 50C(1)
Sub-s. (1)(a) -- agreement-date SDV election (with banking-channel part-consideration)	1961 s. 50C(1) Proviso
Sub-s. (1)(b) -- 110% safe harbour (FA 2020)	1961 s. 50C(1) Second Proviso [FA 2020 raised from 105%]
Sub-s. (2) -- DVO reference for assessee challenge	1961 s. 50C(2)
Sub-s. (3) -- DVO value > SDV: SDV prevails	1961 s. 50C(2) Proviso

STATUTORY ARCHITECTURE

TRIGGER (sub-s. 1): Where consideration received / accruing from transfer of LAND OR BUILDING (or both) is LESS THAN STAMP DUTY VALUE (SDV) -- the value adopted / assessed / assessable by Stamp Duty authority -- SDV is deemed FVOC for s. 72 CG computation. RELIEF MECHANISM 1 -- AGREEMENT-DATE SDV (sub-s. 1(a)): Where (i) date of agreement-fixing-consideration and date of registration are NOT THE SAME; AND (ii) part or full consideration received on or before agreement-date in 'specified banking or online mode' (s. 66(32) of 2025 Act -- account payee cheque / NEFT / RTGS / UPI / IMPS / cards), then SDV ON THE DATE OF AGREEMENT may be taken as FVOC. Effect: protects assessee from later-year SDV revisions in property markets where agreement and registration are months / years apart (typical for under-construction / installment-sale). RELIEF MECHANISM 2 -- 110% SAFE HARBOUR (sub-s. 1(b)): If SDV DOES NOT EXCEED 110% of consideration, the ACTUAL CONSIDERATION is FVOC. So a 10% buffer for genuine market-vs-circle-rate variation. FA 2020 enhanced from earlier 105% to 110%. Practitioner: most metro / Tier-1 transactions now within 110%; circle rates have caught up to market in major cities. RELIEF MECHANISM 3 -- DVO REFERENCE (sub-ss. 2-3): Where (a) assessee CLAIMS SDV exceeds FMV on transfer date; AND (b) SDV has not been disputed in any other appeal / revision, AO MAY refer valuation to DVO (Departmental Valuation Officer per s. 269(3)-(8)). If DVO's value EXCEEDS SDV, SDV prevails (DVO higher value not used). If DVO's value LESS THAN SDV, DVO value used. So the DVO route can only HELP the assessee, never hurt.

CASE LAW

(i) CIT v. Smt. Ravi Sundara Reddy (AP HC) -- s. 50C strict reading; SDV-as-FVOC even where assessee proves under-pricing not present. (ii) ITO v. K.P. Varghese (SC, 1981, 131 ITR 597) -- pre-FA 2002 era principle; deemed FVOC requires legal authority; codified by FA 2002. (iii) CIT v. K.R. Palanisamy (Mad HC) -- agreement-date SDV election interpretation. (iv) Smt. Sumitra Devi v. CIT (Raj HC) -- DVO reference protocol. (v) FA 2020 Memorandum -- 105% to 110% rationale (genuine variation buffer). (vi) Recent ITAT decisions: under-construction property + delayed-registration + agreement-date SDV election -- documenting banking-channel part-payment by agreement-date critical.

PLANNING NOTES

(i) AGREEMENT-DATE PROTECTION (sub-s. 1(a)) -- for under-construction / pre-launch deals, document agreement-date SDV; ensure part-payment in banking channel by agreement-date. (ii) 110% SAFE HARBOUR -- compute SDV vs consideration ratio; if within 110%, no s. 78 issue. (iii) DVO REFERENCE -- where SDV genuinely overstates FMV (e.g., distressed sale, encumbered property, partition / family settlement), invoke sub-s. (2) DVO route -- can only reduce, not increase. (iv) SDV CHALLENGE -- separate stamp-duty appeal under State law typically more effective than DVO route; but s. 78(2)(b) bars DVO if other-forum-challenge pending. Choose strategically. (v) TRANSACTION DOCUMENTATION -- agreement to sale + registry + SDV computation; FA 2020 110% buffer document explicitly. (vi) BUYER-SIDE INTERACTION -- s. 92 (other sources) read with s. 78 mirror -- buyer's deemed-receipt of SDV-MINUS-CONSIDERATION as IFOS (under s. 92(2)(j) similar).

CROSS-REFERENCES

Section 67 -- CG charge.
Section 72 -- Mode of computation (FVOC use).
Section 79 / 80 -- FMV-as-FVOC for unquoted shares / consideration-not-ascertainable.
Section 89 -- Reference to Valuation Officer.
Section 92(2)(j) -- Buyer-side IFOS deeming for under-priced property purchase.
Section 66(32) -- 'Specified banking or online mode' definition.
Section 269(3)-(8) -- DVO procedural framework.
Stamp Acts (State-level) -- SDV determination.

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