Taxation of Immovable Property Under the New Income-tax Act, 2025

Understanding Section 78 (Old 50C) and Section 92(2)(m) (Old 56(2)(x))

The new Income-tax Act, 2025 has reorganized and renumbered several important provisions relating to immovable property transactions. Among the most important changes for property buyers, sellers, builders, investors, and tax professionals are the provisions relating to transactions carried out below stamp duty value.

Two key provisions now govern such situations:

• Section 78 – applicable to the seller
• Section 92 – applicable to the buyer

These sections are broadly equivalent to the old provisions of Section 50C and Section 56(2)(x) under the Income-tax Act, 1961.

1. Section 78 – Stamp Duty Value Deemed as Sale Consideration

(Corresponding to old Section 50C)

Section 78 applies where an immovable property is sold for a consideration lower than the value adopted by the stamp valuation authority (Jantri value / Ready Reckoner value).

In such cases, the stamp duty value is deemed to be the sale consideration for computation of capital gains.

Example

Suppose:

• Actual sale price = ₹80 lakh
• Stamp duty value = ₹1 crore

Even though the seller actually received ₹80 lakh, for income-tax purposes the sale consideration will be deemed to be ₹1 crore.

Accordingly:

• Capital gains will be calculated on ₹1 crore
• Seller may pay higher tax despite receiving lower consideration

2. Section 92 – Taxation in Hands of Buyer

(Corresponding to old Section 56(2)(x))

Section 92 taxes the buyer when immovable property is purchased below stamp duty value.

Where the difference between:

• purchase price, and
• stamp duty value

exceeds prescribed limits, the difference becomes taxable in the hands of the purchaser under the head:

“Income from Other Sources”

Example

Suppose:

• Purchase price = ₹80 lakh
• Stamp duty value = ₹1 crore

Difference = ₹20 lakh

This ₹20 lakh may become taxable in the buyer’s hands under Section 92.

Thus, in one transaction:

• Seller may face taxation under Section 78
• Buyer may face taxation under Section 92.

3. Dual Taxation Impact in Property Transactions

One of the most significant aspects of these provisions is that both parties to the transaction may face tax consequences simultaneously.

This creates substantial tax exposure in undervalued property transactions.

4. Safe Harbour Relief

To avoid hardship due to minor valuation differences, the law provides a safe harbour limit.

Generally, no taxation arises if:

• difference is within prescribed percentage limits of 10%.

This relief is especially useful where:

• market conditions fluctuate,
• distress sales occur,
• negotiated pricing differs slightly from jantri value.

5. Important Exceptions

The buyer taxation provisions under Section 58 generally do not apply in certain genuine transactions such as:

• Gifts from relatives
• Property received under inheritance
• Property received through will
• Marriage gifts
• Certain family settlements
• Certain redevelopment arrangements
• Specified exempt transfers

These exceptions continue to provide relief in bona fide non-commercial transactions.

6. Practical Impact on Real Estate Sector

The provisions significantly affect:

• Real estate developers
• Investors
• Landowners
• Joint Development Agreements (JDAs)
• Redevelopment projects
• Distressed property sales
• Family property transfers

Before entering into any immovable property transaction, parties should:

• compare actual consideration with jantri value,
• evaluate tax implications on both buyer and seller,
• verify safe harbour applicability,
• maintain proper valuation documentation.