A single 10% tolerance band, harmonised across three sections since the Finance Act 2020: stay inside it and the actual sale price stands for tax purposes on both sides. Step outside it, and the stamp duty value becomes the deemed consideration — for the seller’s gain AND the buyer’s other-income exposure.
Step outside the 10% band and the same stamp duty value inflates the seller’s taxable gain or profit AND creates fresh other-income exposure for the buyer — on the same transaction, computed under two different heads of income, in two different returns. An audit of either party’s property purchase or sale should test both sides, not just the one whose return is being audited.
When immovable property is transferred for a consideration lower than its stamp duty value (SDV), Sec 50C substitutes the SDV for the actual consideration when computing the seller's capital gain (if the property is a capital asset), and Sec 43CA does the same for business profit (if the property is stock-in-trade for a real-estate business). A safe-harbour tolerance band exempts marginal gaps: if SDV does not exceed 110% of the actual consideration, the actual consideration is accepted as-is — no adjustment. This band was widened from 5% to 10% by the Finance Act 2020, effective AY 2021-22, and courts have since applied it retrospectively to earlier years as a curative, remedial provision.
The same 10% tolerance test applies, harmonised, to the BUYER's side under Sec 56(2)(x): if a person receives immovable property for consideration less than the SDV, the shortfall is taxable as income from other sources — but only if the shortfall exceeds the HIGHER of ₹50,000 or 10% of the consideration paid. A transaction inside the 10% band on the seller's side is, by the same arithmetic, inside the buyer's own tolerance test too.
If the stamp duty value is later substituted by a Departmental Valuation Officer's (DVO) valuation — which either party can request where SDV exceeds fair market value and the taxpayer has not separately disputed it — the tolerance band applies with reference to the DVO figure, not the original stamp duty value.
A residential plot (capital asset), cost of acquisition ₹30,00,000, sold for ₹50,00,000. Stamp duty value at the time of transfer: ₹54,00,000.
