Section 78: special provision for full value of consideration in certain cases

Introduction

Capital gains on land or building can use stamp value in place of a lower contract price. Before substituting, test the 110% tolerance, agreement-date option and valuation challenge route.

Key takeaways

The core rule

Section 78(1) provides that if the consideration received or accruing from transfer of land or building (or both) is less than the stamp duty value, the stamp duty value is deemed to be the full value of consideration for purposes of Section 72, subject to two qualifications:

• If the date of the agreement fixing the consideration is different from the date of registration of the transfer, and part or full consideration was received on or before the agreement date through a "specified banking or online mode" (as defined in Section 66(32)), the stamp duty value as on the agreement date may be used instead of the value on the registration date.
• If the stamp duty value does not exceed 110% of the actual consideration received, the actual consideration is treated as the full value of consideration (i.e. the deeming rule does not kick in within this 10% tolerance band).

Disputing the stamp duty value

Section 78(2) allows the Assessing Officer to refer the valuation to a Valuation Officer (applying Section 269(3) to (8) with necessary modifications), where the assessee claims the stamp duty value exceeds the property's fair market value as on the transfer date, and that stamp duty value has not been disputed in any appeal, revision or other proceeding.

Section 78(3) provides that if the Valuation Officer's determined value exceeds the stamp duty value, the stamp duty value (not the higher valuation) is taken as the full value of consideration.

Document each valuation date

Compare stated consideration and registration-date stamp value, then test the safe harbour.

Where an earlier agreement fixed the price, preserve the specified banking or online receipt on or before that date before using the agreement-date stamp value.

Step-by-step flow for applying Section 78

1. 1

   Is the capital asset land, building or both?

   • No: Section 78 does not apply; see Section 79 or 80 where relevant.
   • Yes: Go to the next step.
2. 2

   Is the consideration less than the stamp duty value?

   • No: Use the actual consideration.
   • Yes: Go to the next step.
3. 3

   Were the agreement and registration on different dates, with some consideration paid on or before the agreement through specified banking or online mode?

   • Yes: The stamp duty value on the date of agreement may be used.
   • No: Use the stamp duty value on the date of transfer.
4. 4

   Does the stamp duty value exceed 110% of the consideration?

   • No: The actual consideration is accepted (Section 78(1)(b)).
   • Yes: Stamp duty value is deemed to be the full value of consideration.
5. 5

   Do you claim the stamp duty value exceeds fair market value?

   If the value has not been disputed elsewhere, the Assessing Officer may refer it to a Valuation Officer. If the Valuation Officer's value is higher than the stamp duty value, the stamp duty value is used (Section 78(3)).

Practical checklist

Glossary

Stamp duty value

Value adopted, assessed or assessable by the stamp valuation authority for the property.

Valuation Officer

Officer to whom disputed valuation can be referred under the section's conditions.

Frequently asked questions