Taxability of Land and Buildings – With or Without Consideration

 Certainly! Here's a detailed explanation of the tax treatment of immovable property (land and buildings) received with or without consideration under Section 56(2)(x) of the Income-tax Act, 1961:

 Taxability of Land and Buildings – With or Without Consideration

(Under the head “Income from Other Sources”)

Section 56(2)(x) applies when any person receives an immovable property (i.e., land or building or both) either:

 1. Without Consideration (i.e., Gift)

·         If the stamp duty value (SDV) of the property exceeds ₹50,000, the entire SDV is taxable in the hands of the recipient.

 Example:

·         You receive a flat as a gift from a friend (non-relative).

·         Stamp Duty Value (SDV) of flat = ₹12,00,000
➡️ The entire ₹12,00,000 is taxable as income from other sources in your hands.

 2. For Inadequate Consideration

·         If you purchase land or building for less than stamp duty value, and:

o    The difference between SDV and actual consideration exceeds:

§  ₹50,000 AND

§  10% of consideration,
➡️ Then the difference is taxable as income from other sources.

 Example:

·         Purchase price of property = ₹10,00,000

·         Stamp duty value = ₹12,00,000

·         Difference = ₹2,00,000

o    ₹2,00,000 > ₹50,000 ✅

o    ₹2,00,000 > 10% of ₹10,00,000 (= ₹1,00,000) ✅
➡️ Hence, ₹2,00,000 is taxable in your hands under Section 56(2)(x)

 Key Conditions

Condition

Without Consideration

With Inadequate Consideration

Property received (land/building/both)

Yes

Yes

Stamp Duty Value (SDV) > ₹50,000

Entire SDV taxable

Difference taxable only if > ₹50,000 and > 10% rule

From a relative / exempt category

Not taxable

Not taxable

Applies to all persons

Individuals, HUFs, Firms, Companies, Trusts

Same

 Exemptions – When NOT Taxable

Even if land/building is received without or for inadequate consideration, no tax is levied if received:

From / On Account of

Exempt Under 56(2)(x)

Relative (as defined under the Act)

✅ Exempt

On the occasion of marriage (individual only)

✅ Exempt

Under a will or inheritance

✅ Exempt

From local authority / registered trust

✅ Exempt

In contemplation of death

✅ Exempt

 Valuation Rules

·         Stamp Duty Value (SDV) = value adopted or assessed by stamp valuation authority.

·         If date of agreement and date of registration differ, SDV as on agreement date may be considered if some consideration was paid through banking channels before agreement (Section 56 Explanation clause).

 Conclusion

Type of Receipt

Taxable Amount under Section 56(2)(x)

Without consideration (gift)

Entire Stamp Duty Value, if > ₹50,000

For inadequate consideration

Difference between SDV and consideration, if > ₹50,000 and > 10% of actual consideration

From relative / on marriage / will

Fully Exempt

 

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