The stamp duty value of the flat my client bought exceeds the price by about eight per cent. Is there a tolerance band, and what was it in the year of my assessment?
There is, but only from AY 2019-20, and its size changed. Item (B) of section 56(2)(x)(b) was substituted by the Finance Act 2018 with effect from 1 April 2019 to charge the excess only where it is more than the higher of Rs 50,000 and five per cent of the consideration, and the word 'five' was substituted by 'ten' by the Finance Act 2020 (Act No. 12 of 2020) with effect from 1 April 2021. For AY 2018-19 and earlier there was no percentage band at all under this clause: any excess over Rs 50,000 was chargeable.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2021-04-01, reported as Income-tax Act, 1961, s.56(2)(x)(b)(B); substituted by the Finance Act, 2018, w.e.f. 1-4-2019; 'ten' substituted for 'five' by Act No. 12 of 2020, w.e.f. 1-4-2021. It bears on section 56(2)(x), section 56(2)(x)(b), section 50C, section 43CA of the Income Tax Act 1961, in Gifts, Shares & Angel Tax, Capital Gains and How Tax Law Is Read matters.
Getting the year wrong here decides the case, in either direction. An eight per cent gap is chargeable for AY 2020-21 and not chargeable for AY 2021-22. And an assessment for AY 2018-19 or earlier cannot be met with the five per cent argument at all under this clause — which is why the tolerance-band arguments for those years are run by borrowing the section 50C band into the buyer's charge, an extension that is judicial rather than statutory and must be argued as such. Note that the two charges have separate histories: section 50C acquired its five per cent band from the Finance Act 2018 with effect from AY 2019-20 as well, but the words of each provision are different, and a band read into one does not travel to the other by force of law. Note also the further proviso to clause (x), which does not itself prescribe any conditions: it provides that in the case of property referred to in the second proviso to sub-section (1) of section 43CA, item (B)(ii) has effect as if 'twenty per cent' were substituted for 'ten per cent'. The conditions for that relief are in the second proviso to section 43CA(1) and must be read there; this entry does not state them.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 56(2)(x) applies where any person receives, in any previous year, from any person or persons on or after the 1st day of April 2017, any of the receipts it lists. Sub-clause (b) deals with immovable property: item (A) charges the stamp duty value where the property is received without consideration and that value exceeds fifty thousand rupees; item (B) charges the excess of the stamp duty value over the consideration where the property is received for a consideration. It is item (B) that carries the margin.
Item (B) as currently printed reads: 'for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:— (i) the amount of fifty thousand rupees; and (ii) the amount equal to ten per cent of the consideration'. That form was introduced by the Finance Act 2018 with effect from 1 April 2019 with 'five per cent' in item (ii), and 'five' was substituted by 'ten' by Act No. 12 of 2020 with effect from 1 April 2021. Before 1 April 2019 item (B) read: 'for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration'.
Statutory history rather than judicial reasoning. Two points of construction follow from the words. The test is comparative — the excess must be more than the higher of the two amounts, so on a small consideration the fifty thousand rupee floor governs and on a large one the percentage governs. And the percentage is computed on the consideration, not on the stamp duty value.
the amount equal to ten per cent of the consideration
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Handle my notice → Ask a CA on WhatsAppThere is, but only from AY 2019-20, and its size changed. Item (B) of section 56(2)(x)(b) was substituted by the Finance Act 2018 with effect from 1 April 2019 to charge the excess only where it is more than the higher of Rs 50,000 and five per cent of the consideration, and the word 'five' was substituted by 'ten' by the Finance Act 2020 (Act No. 12 of 2020) with effect from 1 April 2021. For AY 2018-19 and earlier there was no percentage band at all under this clause: any excess over Rs 50,000 was chargeable. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 56(2)(x), section 56(2)(x)(b), section 50C, section 43CA of the Income Tax Act 1961. It is reported as Income-tax Act, 1961, s.56(2)(x)(b)(B); substituted by the Finance Act, 2018, w.e.f. 1-4-2019; 'ten' substituted for 'five' by Act No. 12 of 2020, w.e.f. 1-4-2021. Getting the year wrong here decides the case, in either direction. An eight per cent gap is chargeable for AY 2020-21 and not chargeable for AY 2021-22. And an assessment for AY 2018-19 or earlier cannot be met with the five per cent argument at all under this clause — which is why the tolerance-band arguments for those years are run by borrowing the section 50C band into the buyer's charge, an extension that is judicial rather than statutory and must be argued as such. Note that the two charges have separate histories: section 50C acquired its five per cent band from the Finance Act 2018 with effect from AY 2019-20 as well, but the words of each provision are different, and a band read into one does not travel to the other by force of law. Note also the further proviso to clause (x), which does not itself prescribe any conditions: it provides that in the case of property referred to in the second proviso to sub-section (1) of section 43CA, item (B)(ii) has effect as if 'twenty per cent' were substituted for 'ten per cent'. The conditions for that relief are in the second proviso to section 43CA(1) and must be read there; this entry does not state them. If it applies to you, the first step is this: Fix the assessment year first, then the margin: nil band up to AY 2018-19, five per cent for AY 2019-20 and AY 2020-21, ten per cent from AY 2021-22.
Section 56(2)(x) applies where any person receives, in any previous year, from any person or persons on or after the 1st day of April 2017, any of the receipts it lists. Sub-clause (b) deals with immovable property: item (A) charges the stamp duty value where the property is received without consideration and that value exceeds fifty thousand rupees; item (B) charges the excess of the stamp duty value over the consideration where the property is received for a consideration. It is item (B) that carries the margin. The matter was decided on 2021-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Item (B) as currently printed reads: 'for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:— (i) the amount of fifty thousand rupees; and (ii) the amount equal to ten per cent of the consideration'. That form was introduced by the Finance Act 2018 with effect from 1 April 2019 with 'five per cent' in item (ii), and 'five' was substituted by 'ten' by Act No. 12 of 2020 with effect from 1 April 2021. Before 1 April 2019 item (B) read: 'for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration'.
Statutory history rather than judicial reasoning. Two points of construction follow from the words. The test is comparative — the excess must be more than the higher of the two amounts, so on a small consideration the fifty thousand rupee floor governs and on a large one the percentage governs. And the percentage is computed on the consideration, not on the stamp duty value. In the words reproduced by the source cited on this page: "the amount equal to ten per cent of the consideration"
It was decided by the CBDT Circulars & Instructions on 2021-04-01 and is reported as Income-tax Act, 1961, s.56(2)(x)(b)(B); substituted by the Finance Act, 2018, w.e.f. 1-4-2019; 'ten' substituted for 'five' by Act No. 12 of 2020, w.e.f. 1-4-2021. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 56(2)(x), section 56(2)(x)(b), section 50C, section 43CA, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Item (B) as currently printed reads: 'for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:— (i) the amount of fifty thousand rupees; and (ii) the amount equal to ten per cent of the consideration'. That form was introduced by the Finance Act 2018 with effect from 1 April 2019 with 'five per cent' in item (ii), and 'five' was substituted by 'ten' by Act No. 12 of 2020 with effect from 1 April 2021. Before 1 April 2019 item (B) read: 'for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration'. It arises in Gifts, Shares & Angel Tax, Capital Gains and How Tax Law Is Read matters, on section 56(2)(x), section 56(2)(x)(b), section 50C, section 43CA of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Compute the test as the statute frames it — the excess must be more than the HIGHER of Rs 50,000 and the percentage of the consideration, not merely more than the percentage. For years before AY 2019-20, do not assert a statutory band; if the tolerance argument is to be run, run it expressly as a borrowing from section 50C and be ready to defend the borrowing on the words of clause (x). Before settling for ten per cent, check whether the property is one referred to in the second proviso to section 43CA(1) — if it is, item (B)(ii) reads twenty per cent; read that proviso for its conditions rather than relying on a summary of them. Where the stamp duty value is disputed on the merits rather than on margin, ask the officer in writing to refer the valuation, and keep the request on the record — a CIT(A) will not assume it was made.
Still good law. The ten per cent figure appears on the published editions as amended up to 2021, 2022, 2023, 2024 and 2025, and no later substitution has been found on the current one. The commencement dates are taken from footnotes on the earlier editions, used here as legislative history and not to state the current position. ANY ENTRY ASSERTING THE FIVE PER CENT MARGIN FOR ASSESSMENT YEAR 2021-22 OR LATER IS SUPERSEDED BY AMENDMENT, and any assessment applying ten per cent to a year before 2021-22, or any percentage at all to a year before 2019-20, is applying the wrong text. That is the whole use of the entry: the margin is nil to assessment year 2018-19, five per cent for 2019-20 and 2020-21, and ten per cent from 2021-22. Three things the entry does not settle. No decision construing item (B) has been found, so nothing here states how the courts have applied the margin — in particular whether the band can be borrowed into a year before 2019-20 by analogy with section 50C, which is an argument and not a statutory position. The further proviso substituting twenty per cent for ten per cent where the property is of the kind referred to in the second proviso to section 43CA(1) is set out, but the conditions of that relief live in section 43CA(1) and are not stated here. And the entry says nothing about the first proviso to clause (x), which lets the stamp duty value on the date of an agreement be taken where part of the consideration was paid by a specified mode on or before that date; that proviso decides a great many of these cases and has to be read separately. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
DATED FROM THE SECTION'S OWN AMENDMENT FOOTNOTES, edition by edition. The edition as amended up to 2018 prints the pre-2018 item (B) — the excess over fifty thousand rupees, with no percentage — followed by the note that item (B) 'shall be substituted ... by the Finance Act, 2018, w.e.f. 1-4-2019' in the five per cent form. The first 2019 edition prints the five per cent form with the footnote 'Sub. by the Finance Act, 2018, (w.e.f. 1-4-2019).' The second 2019 edition still prints five per cent. The edition as amended up to 2021 prints 'ten' in square brackets with the footnote 'Sub. for "five" by the Act No. 12 of 2020, w.e.f. 1-4-2021', and the edition as amended up to 2022 carries the same footnote text under a different number. The editions as amended up to 2022, 2023 and 2025 all print ten per cent. So the chain is complete and each figure is tied to an instrument and a date. ONE STRAY FOOTNOTE IS RECORDED AND RELIED ON FOR NOTHING. One reading of the 2021 edition also returned a footnote reading 'Ins. by the Act. No. 23 of 2019, w.e.f. 1-4-2020', which does not fit the item (B) history evidenced above and which could not be associated with any clause. It is noted here so that a later reader who meets it knows it has been seen and set aside. THE TWENTY PER CENT PROVISO. The further proviso to clause (x) reads: 'Provided also that in case of property being referred to in the second proviso to sub-section (1) of section 43CA, the provisions of sub-item (ii) of item (B) shall have effect as if for the words "ten per cent", the words "twenty per cent" had been substituted'. The conditions of that relief are in the second proviso to section 43CA(1), which has not been read for this entry; none of them is stated here, and a claim to the twenty per cent margin must be built on that proviso and not on this one. 'decided_on' is the commencement date of the substitution the quotation in this entry is taken from — 'Sub. for "five" by the Act No. 12 of 2020, w.e.f. 1-4-2021' — and is not a judgment date. ONE POINT OF CONSTRUCTION that the words settle and that is regularly argued wrongly. The test in item (B) is comparative: the excess must be more than the HIGHER of fifty thousand rupees and the percentage of the consideration. So on a small consideration the fifty thousand rupee floor governs and on a large one the percentage governs, and the percentage is computed on the consideration and not on the stamp duty value. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Item (B) as currently printed reads: 'for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts, namely:— (i) the amount of fifty thousand rupees; and (ii) the amount equal to ten per cent of the consideration'. That form was introduced by the Finance Act 2018 with effect from 1 April 2019 with 'five per cent' in item (ii), and 'five' was substituted by 'ten' by Act No. 12 of 2020 with effect from 1 April 2021. Before 1 April 2019 item (B) read: 'for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration'.
TaxSphere, “Statutory position — the inadequate-consideration margin in section 56(2)(x)(b): none before AY 2019-20, five per cent from AY 2019-20, ten per cent from AY 2021-22”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-56-2-x-immovable-property-tolerance-five-then-ten-per-cent/ (validity last checked 2026-09-08)
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