Section 50C of the Income Tax lays down provisions for calculating Capital Gains from Real Estate Transactions. Section 50C is one of the widely known provision in the Income Tax Act. Calculating Capital Gain from a Real Estate transaction like, Sale of Land or Apartment Building is little confusing. Section 50C of the Income Tax Act provides the detail for calculating such Capital Gain. In this post we will cover the Scope of Section 50C, Method of Calculating Capital Gains under section 50C of the Income Tax Act, Illustrative example of Section 50C, Relevant Case Laws and Judgements related to Section 50C of the Income Tax Act and also other interpretations.
Scope of Section 50C Income Tax Act
Section 50C makes a special provision for determining the full value of consideration in cases of transfer of immovable property.
CG Calculation Section 50C Income Tax Act
It provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed by any authority of a State Government (i.e. “stamp valuation authority”) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed shall be deemed to be the full value of the consideration, and capital gains shall be computed on the basis of such consideration under Section 48 of the Income-tax Act.
Rationalization of section 50C in case sale consideration is fixed under agreement executed prior to the date of registration of immovable property (w.e.f. AY 2017-18)
Section 50C of the Act has been amended in line with section 43CA to provide that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purposes of computing full value of consideration for such transfer.
It is further provided that this provision shall apply only in a case where the amount of consideration referred to therein, 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 a bank account, on or before the date of the agreement of transfer.
Tax Treatment Under Section 50C Income Tax Act
Under section 50C if a property is sold at a value lesser than prevailing Circle rate of the location, for income tax purposes the property will be deemed to be sold at Circle rate and Capital gains tax (long term or short term depending on duration of ownership of the property) will be levied on the same.
example of section 50C: If the Circle rate computation works out to be 90 lacs and if the property is sold for 80 lacs. It will be assumed that property is sold for 90 lacs and accordingly Capital gains tax will be will be levied on the same.
Case Laws on Section 50C Income Tax Act
- Mumbai Tribunal in Mrs Nandidta Khosla ( Imp Section 50C Case)
- Jodhpur Tribunal in case of Meghraj Baid v. ITO 
- Delhi Tribunal in case of ITO v. Smt. Manju Rani Jain 
Property Sold below Stamp Value – Section 50C
The the application of section 50C assumes notional income to the extent of gap between the consideration and stamp value. non receipt of that additional money is rather the basis of invoking 50C.
Section 11(1A) and Section 50C Of Income Tax Act
As per section 50C of income tax act, if the consideration receivable on transfer of land and building is lower than the stamp duty value than such stamp duty value is to be considered as consideration for calculation of capital gain.
As per section 11(1A) of the act, if any capital asset is sold by the society than capital gain is taxable in the hands of socity provided that the net consideration on transfer of such asset is not invested in procurement of another asset.