Section 43CA of the Income Tax Act, 1961 is applicable to the taxation of income from the transfer of immovable property, including land, building or both.
This section deals with the valuation of property for the purpose of computing income tax liability in cases where the transfer of immovable property takes place below the fair market value (FMV) of the property.
According to section 43CA, if an immovable property is transferred for a consideration which is less than the FMV of the property as on the date of transfer, then the value of the property for the purpose of computing income tax liability shall be taken as the FMV or the consideration, whichever is higher.
This provision has been introduced to prevent tax evasion by sellers who undervalue the sale consideration to save on tax liability. It also helps in ensuring that the true value of the property is reflected in the records of the buyer and seller.
Section 50C of the Income Tax Act, 1961, is a provision that deals with the valuation of capital assets, specifically immovable property such as land, buildings, or both.
Under this section, if the consideration received or accruing from the transfer of an immovable property is less than the value adopted or assessed by the stamp valuation authority for the purpose of payment of stamp duty, then the value assessed by the stamp valuation authority shall be deemed to be the full value of consideration for the purposes of computing capital gains tax.
In other words, if the consideration for transfer of an immovable property is less than the value assessed by the stamp valuation authority, the capital gains will be calculated on the higher value determined by the stamp valuation authority, rather than the actual consideration received.
The rationale behind this provision is to prevent the understatement of sale consideration by sellers to evade taxes. It ensures that the sale of immovable property is carried out at fair market value, and the government is able to collect appropriate taxes on such transactions.
This article is for informational purposes only and is based on the author’s interpretation of the relevant provision. It should not be taken as professional advice.
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