Section 43ca income tax act ? plz explain with example?

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

31 July 2015 plz explain with example of below section:::

Special provision for full value of consideration for transfer of assets other than capital assets in certain cases.—(1) Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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23 July 2025 Certainly! Let’s break down Section 43CA of the Income Tax Act, 1961 in simple terms with an example.

🔍 What is Section 43CA?
Section 43CA applies when:

An asset is not a capital asset (i.e., it's held as stock-in-trade), and

The asset is land or building or both, and

The sale consideration is less than the stamp duty value (SDV), i.e., circle rate / ready reckoner rate.

In such cases, for the purpose of calculating business income, the stamp duty value will be treated as the full sale value, not the actual amount received.

✅ Applicability:
Applies only to builders, developers, or traders selling land/building as stock-in-trade, not capital asset.

The difference between stamp duty value and actual sale value is taxed as business income.

💡 Example:
Let’s say:

Mr. A is a real estate developer (asset is stock-in-trade).

He sells a flat to Mr. B for ₹40,00,000.

But the stamp duty value (circle rate) of the flat is ₹50,00,000.

🔹 Actual Sale Price = ₹40,00,000
🔹 Stamp Duty Value = ₹50,00,000
🔹 Difference = ₹10,00,000

✏️ Under Section 43CA:
Mr. A must consider ₹50,00,000 as the sale price for computing business income, not ₹40,00,000.

So even though he received ₹40 lakh, he will be taxed as if he earned ₹50 lakh.

🔄 Relief Provided (Safe Harbour Rule):
The law provides a margin of tolerance:

If the difference between sale price and SDV is within 10% (now 20% in some cases), then actual sale price will be accepted.

👉 Example with Safe Harbour:
If Sale Price = ₹45,00,000
SDV = ₹50,00,000
Difference = 10%

➡️ Since difference ≤ 10%, Section 43CA won’t apply. ₹45,00,000 will be accepted as sale value.

🧾 Purpose of Section 43CA:
To curb black money and under-reporting of real estate transactions where sale is shown at a lower value to reduce taxes.

✅ Summary:
Particulars Section 43CA Treatment
Applies to Land/building held as stock-in-trade
Not applicable to Capital assets (covered under Section 50C)
When it applies If sale value < stamp duty value
Full value of consideration deemed Stamp duty value
Safe harbour If difference ≤ 10% or 20% (as notified), no adjustment

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