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TMI BlogFull value of consideration / Stamp Duty Valuation with Safe Harbor - Computation of Capital Gains: Clause 78 of the Income Tax Bill, 2025 vs. Section 50C of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... of consideration" for such transfers. This determination is crucial as it affects the computation of capital gains tax liability. The legislative intent behind these provisions is to prevent tax evasion through undervaluation of property in sale transactions. This commentary will delve into the nuances of Clause 78 and Section 50C, analyze their provisions, and compare their implications for stakeholders. Objective and Purpose The primary objective of both Clause 78 and Section 50C is to ensure that the value of consideration declared in property transactions reflects the true market value. This is achieved by deeming the stamp duty value as the full value of consideration when the declared consideration is less than the stamp duty value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted as the full value. * This safe harbor provision allows for minor discrepancies between the declared consideration and the stamp duty value, recognizing that slight variations in valuation are possible. 4. Valuation by Assessing Officer: * Clause 78(2) permits the Assessing Officer to refer the valuation to a Valuation Officer if the assessee claims that the stamp duty value exceeds the fair market value, provided the stamp duty value is not under dispute in any legal proceedings. * This provision offers a mechanism for taxpayers to contest the stamp duty valuation if they believe it is not reflective of the fair market value. 5. Definition of "Assessable": * Clause 78(3) defines "assessable" as the value that would be ado ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not exceed 110% of the declared consideration, the declared value is accepted. * This safe harbor provision is consistent with the approach in Clause 78, allowing for minor valuation discrepancies. 4. Valuation by Assessing Officer: * Section 50C(2) allows for a reference to a Valuation Officer if the taxpayer disputes the stamp duty value, provided it is not under legal dispute. * This mechanism enables taxpayers to challenge the stamp duty valuation if they believe it does not reflect the fair market value. 5. Definition of "Assessable": * The section defines "assessable" similarly to Clause 78, focusing on the stamp valuation authority's perspective. * This definition ensures consistency in interpretation for tax pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty transactions with the stamp duty value, thereby reducing the scope for undervaluation. The introduction of a 110% safe harbor threshold in both provisions acknowledges the potential for minor valuation discrepancies and provides a margin for such variations. One notable difference is in the reference to valuation procedures. Clause 78 refers to sections (clause) 269(3) to (8) for valuation procedures, while Section 50C references sections from the Wealth-tax Act, 1957. This difference in procedural references may have implications for the application of valuation processes, although the underlying intent remains consistent. Conclusion Clause 78 of the Income Tax Bill, 2025, and Section 50C of the Income-tax Act, 1961, both serve to al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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