Section 78 of the Income-tax Act, 2025 deems the stamp duty value to be the full value of consideration where land or building is sold below it. A safe harbour applies if the stamp duty value does not exceed 110% of the consideration, and the agreement-date value may be used where payment was banked.
What section 78 does
Section 78 is the anti-undervaluation rule for immovable property — the successor to section 50C of the Income-tax Act, 1961. If you sell land or a building for less than the stamp duty value, the stamp duty value is deemed to be your sale consideration for computing capital gains under section 72.
Two reliefs soften it. First, a 110% safe harbour: if the stamp duty value does not exceed 110% of the actual consideration, the actual consideration stands. Second, where the agreement and registration happen on different dates, the stamp duty value on the agreement date may be used — but only if part or full consideration was received on or before that date through a specified banking or online mode.
Sub-section (2) preserves the right to challenge the stamp duty value by referring the valuation to a Valuation Officer, and sub-section (3) caps the downside: if the Valuation Officer comes back higher than the stamp duty value, the stamp duty value is used, not the higher figure.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 50C(1) | Stamp duty value deemed full value of consideration | 78(1) |
| 50C(1), first proviso | Agreement-date value option | 78(1)(a) |
| 50C(1), third proviso | 110% safe harbour | 78(1)(b) |
| 50C(2) | Reference to Valuation Officer | 78(2) |
| 50C(3) | Valuation Officer's higher value ignored | 78(3) |
| 50CA | Unquoted shares | 79 |
Section 78 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — the substitution rule
If the consideration received or accruing on the transfer of a capital asset being land or building or both is less than the stamp duty value, then for the purposes of section 72 the stamp duty value is deemed to be the full value of consideration — subject to the two carve-outs in clauses (a) and (b).
Clause (1)(a) — the agreement-date option and its payment condition
The stamp duty value on the date of the agreement may be taken as the full value of consideration if two conditions are both met: (i) the date of the agreement fixing the consideration and the date of registration are not the same; and (ii) part or full consideration was received on or before the date of the agreement in a 'specified banking or online mode' as defined in section 66(32). Cash paid on the agreement date does not preserve the option.
Clause (1)(b) — the 110% safe harbour
If the stamp duty value does not exceed 110% of the consideration received or accruing, then that consideration is deemed to be the full value of consideration for section 72. A 10% tolerance band therefore exists before the substitution bites at all.
Sub-section (2) — referring the valuation to a Valuation Officer
The Assessing Officer may refer the valuation to a Valuation Officer, with sections 269(3) to (8) applying with necessary modifications, where (a) the assessee claims the stamp duty value exceeds the fair market value on the date of transfer, and (b) the stamp duty value has not been disputed in any appeal or revision and no reference has been made before any other authority, court or the High Court.
Sub-section (3) — the downside is capped
If the Valuation Officer's value exceeds the stamp duty value, the stamp duty value is taken as the full value of consideration. Asking for a reference therefore cannot make your position worse than the stamp duty value — a point worth knowing before deciding whether to contest.
Worked example
Three sales of immovable property in tax year 2026-27.
| Case | Consideration | Stamp duty value | Full value of consideration under section 78 |
|---|---|---|---|
| A | ₹1,00,00,000 | ₹1,08,00,000 | ₹1,00,00,000 — stamp duty value is within 110%, so clause (1)(b) protects the actual price |
| B | ₹1,00,00,000 | ₹1,25,00,000 | ₹1,25,00,000 — exceeds 110%, so the stamp duty value is substituted |
| C | ₹1,00,00,000 fixed by an agreement in June 2025, registered March 2027 | ₹1,25,00,000 at registration; ₹1,04,00,000 on the agreement date | ₹1,00,00,000 — the agreement-date value of ₹1,04,00,000 may be used under clause (1)(a), and that is within 110% |
Case C only works if an advance was received on or before the agreement date through a specified banking or online mode under section 66(32). Had the buyer paid that advance in cash, the option would be lost and ₹1,25,00,000 would be substituted — an ₹25,00,000 difference in taxable consideration created purely by the mode of payment.
Compliance checklist and due dates
- Check the circle rate before signing, and compute whether the stamp duty value is within 110% of the price.
- Where an agreement precedes registration, take the advance by banking or online mode on or before the agreement date and retain the bank evidence — clause (1)(a)(ii) makes this decisive.
- Keep a copy of the agreement showing the date the consideration was fixed.
- If the stamp duty value is genuinely above fair market value, consider asking for a reference under sub-section (2) — sub-section (3) caps the outcome at the stamp duty value.
- Do not dispute the stamp duty value in a separate appeal or revision if you intend to seek a Valuation Officer reference; sub-section (2)(b) bars the reference in that case.
- For unquoted shares, the parallel provision is section 79, not section 78.
Common mistakes
- Assuming any shortfall triggers substitution. The 110% band in clause (1)(b) must be breached first.
- Taking the agreement advance in cash and then trying to rely on the agreement-date value.
- Believing a Valuation Officer reference is risky because the value could come back higher. Sub-section (3) caps it at the stamp duty value.
- Applying section 78 to unquoted shares. That is section 79.
- Forgetting that the buyer has a parallel exposure — the difference can be taxed in the buyer's hands under the other sources head.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.