Effective 1/10/2009, difference of over Rs. 50,000 between fair market value and purchase value of immovable property will be taxed as income from other sources in the hand of the buyer if buyer is an individual or HUF. Property is as defined in Section 56 and includes immovable property,  jewellery, shares and securities, work of art, drawings, paintings etc.

In case seller is a relative as defined in this same section, the difference in value will not be taxed. However, you have to produce to the AO an Affidavit from Seller establishing that he or she is your relative and that the property is being sold to you for a consideration of lower than the market value. This affidavit has to be stamped as per law of the state having jurisdiction of the AFFIDAVIT (not necessarily the same as state where the property is located). the stamp duty and registration of the immovable property is payable at the value assessed by the state of location of the immovable property.

For fair market value:-

1) Value determined by stamp duty officer for immovable property.

2) Gold and silver jewellery value will be as per date of sale of the jewellery . Ditto for Shares and Securities if listed. If not listed, a valuation will have to be carried out for these properties.

3) Works of Art, Drawings and Paintings will be as per value determined by valuation officer and may always be subject to litigation.

This is indeed a double whammy as Government has resorted to double taxation to curb black money menace. The seller of property already has to pay CG Tax based on the value determined by stamp duty officer if higher than sale price. The buyer of the property has to pay the tax on IFOS if aggregate difference on all properties purchased by him + other credits is over Rs. 50,000 in a year.

It may be better if buyer pays fair market value to seller so both will save on taxes.

Buyers are advised to consult  Chartered Accountants before the purchase of properties.



  1. Hi Team

    Could you clarify the below;
    If buyer paid @900/- per Sqft against registrar / government value declared is @700/- per Sqft … it means to say buyer has to pay tax for the difference of 200/- per sqft

    Thanks & Regards … Naveen

    1. Dear Mr.Naveen,
      NO. If the government value is Rs700/- and if the buyers buys it at Rs900/- and gets it registered for Rs900/-, tax liability does not arise.

      ecopackindia team

  2. Hi Team

    If the government value is Rs700/- and if the buyers buys it at same price any tax issues arise please

    Thanks you

  3. Hi How do I get a property valuation from the government?

    Is it possible to obtain a fair market evaluation report for property in Bangalore from an accredited institution? Will my banks be able to do it?(The banks that have the home loan for these properties?).

      1. Is there any other source other than banks from where the market value can be ascertained?

  4. Dear Sir,

    I hav purchased a house property @ Rs. 40 lacs five yaers ago. But at that time Stamp duty valuation was Rs. 60lacs. Now today I want to sell that property, then can i take Rs. 60lacs as my cost of acquisition …or will i continue to take Rs. 40 lacs.???

    With Warm Regards,

    1. Dear Sir,
      If you had filed the IT returns for Rs40 lakhs,(acquisition cost) you cannot consider it now for Rs60 lakhs. This amendment came into effect by the end of 2009 and applicable from then on but not for the preceeding years.
      If the AO has assessed the property(acquisition) and accepted your returns for Rs60, then you can take into account Rs60 lakhs, otherwise, not.
      ecopackindia team

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