What if I sell property below the circle rate (section 50C, now section 78), and how is a jointly owned property taxed?

The seller: section 50C (now 78)

When land or a building (held as a capital asset) is sold, compare:

• the price in the deed; and
• the stamp duty value, the value adopted by the stamp authority (circle rate).

If the stamp duty value is more than 110% of the price, the stamp duty value is the sale consideration for capital gains. Within the 10% band, the actual price is used.

Agreement date: if an agreement was made earlier and some payment was received by a banking channel on or before that date, the stamp duty value on the agreement date can be used.

Dispute: if you claim the stamp duty value exceeds the fair market value, you can ask the Assessing Officer to refer the valuation to a Valuation Officer. If the Valuation Officer's value is lower, it is used.

The buyer: section 56(2)(x) (now 92)

If the buyer pays less than the stamp duty value, and the difference is more than ₹50,000 and more than 10% of the price, the difference is taxed as the buyer's income from other sources.

For a business

For property held as stock-in-trade, such as a builder's flats, a similar rule (section 43CA, now section 53) applies to business income.

Jointly owned property

• Each co-owner's share comes from the deed. If the deed is silent, it usually follows each owner's contribution to the purchase.
• Each co-owner computes the gain on their own share, using their share of cost and holding period, and reports it in their own return.
• Exemptions under sections 54, 54EC and 54F (now sections 82, 85 and 86) are claimed separately by each co-owner.
• TDS: the buyer deducts 1% if the total price is ₹50 lakh or more, even if each share is smaller, and deducts separately for each seller in proportion to their share. Make sure each seller's PAN and share are correct, or the credit goes to the wrong person.
• A co-owner who contributed nothing, such as a spouse added only as a name, may find the gain taxed in the hands of the person who paid, under the clubbing rules (section 64, now section 99).