I seek guidance from Chartered Accountants and tax professionals regarding a capital gains matter involving:

  • a notarised agreement for sale executed in FY 2023–24;

  • registration of the final sale deed in FY 2025–26;

  • a difference between the consideration reported in the Income Tax Return and the consideration reflected in the Annual Information Statement; and

  • the possible applicability of the stamp duty value under Section 50C of the Income-tax Act.

Background and Chronology

The property was legally owned by two co-owners in equal proportion:

  • NT – 50% ownership

  • KT – 50% ownership

1. Notarised Agreement in October 2023

In October 2023, falling in FY 2023–24 relevant to AY 2024–25, a notarised agreement for sale was executed along with a power of attorney and consent affidavit.

The total consideration mentioned in the notarised agreement was ₹60 lakh, allocated equally between the two legal co-owners:

  • NT – ₹30 lakh

  • KT – ₹30 lakh

Based on this agreement, NT filed her Income Tax Return for AY 2024–25, treating ₹30 lakh as her share of the sale consideration and computing the capital gains accordingly.

In addition to the ₹60 lakh mentioned in the notarised agreement, the following amounts were paid by bank cheque in October 2023:

  • ₹12 lakh to AT, son of NT

  • ₹13 lakh to MT, wife of KT

These two AT and MT individuals were not legal co-owners of the property. The payments of ₹12 lakh and ₹13 lakh were not specifically recorded or allocated in the notarised agreement.

The actual payment distribution was therefore:

Recipient Amount received
NT, co-owner ₹30 lakh
KT, co-owner ₹30 lakh
AT, son of NT ₹12 lakh
MT, wife of KT ₹13 lakh
Total ₹85 lakh

2. Purchase of New Residential Property

In December 2023, NT purchased a new residential property for approximately ₹64.5 lakh.

While filing the return for AY 2024–25, NT claimed the applicable capital gains exemption based on the capital gains computed by considering ₹30 lakh as her share of the sale consideration as per notarised agreement for sale.

3. Registration of Sale Deed in August 2025

The final sale deed relating to the above transaction was registered in August 2025, falling in FY 2025–26 relevant to AY 2026–27.

By that time, due to developments between October 2023 and August 2025, the total sale consideration mentioned in the registered sale deed was increased from ₹60 lakh to ₹85 lakh.

The registered sale deed:

  • records a total consideration of ₹85 lakh;

  • identifies only NT and KT as the registered co-owners/sellers;

  • states that the entire consideration was received by the two sellers;

  • does not specify how much consideration was received by each co-owner; and

  • does not separately record that ₹12 lakh was paid to AT and ₹13 lakh was paid to MT.

The Index II/registration document also reflects the stamp duty or ready-reckoner value of the property as approximately ₹1.24 crore.

AIS Mismatch

Since NT and KT were equal co-owners, the AIS has attributed 50% of the registered consideration of ₹85 lakh, i.e. ₹42.50 lakh, to NT.

However, NT had already reported only ₹30 lakh as her sale consideration in the return filed for AY 2024–25, based on the notarised agreement executed in October 2023.

This has resulted in a mismatch between:

  • the sale consideration of ₹30 lakh reported in NT’s ITR for AY 2024–25; and

  • the amount of ₹42.50 lakh for AY 2026-27 attributed to NT in the AIS based on the registered sale deed.

There is also a further concern regarding the possible application of Section 50C, since NT’s 50% share of the stamp duty value of ₹1.24 crore would be approximately ₹62 lakh.

Guidance Required

I would be grateful for views on the following issues:

1. Correct Year of Taxability

For capital gains purposes, should the transfer be considered to have taken place:

  • in October 2023, when the notarised agreement, power of attorney and consent affidavit were executed and payments were made and possession was handed over to buyer completely; or

  • in August 2025, when the final sale deed was registered?

2. Treatment of ₹25 Lakh Paid to Relatives

Can the amounts of ₹12 lakh paid to NT’s son and ₹13 lakh paid to KT’s wife be regarded as part of the respective family members’ consideration, even though:

  • they were not legal co-owners;

  • the registered sale deed records only NT and KT as sellers; and

  • the deed states that the entire consideration was received by the two co-owners?

Alternatively, would the full ₹85 lakh be treated as consideration accruing to the two legal co-owners in their 50:50 ownership ratio, irrespective of the actual bank-account-wise distribution?

3. Resolution of AIS and ITR Mismatch

How should NT respond to the AIS mismatch?

Should an AIS feedback response be submitted stating that NT actually received only ₹30 lakh, or would such a response not be sustainable because the registered sale deed identifies only NT and KT as sellers?

What supporting documents would ordinarily be required to substantiate the actual allocation of consideration?

4. Applicability of Section 50C

Considering that the registered consideration is ₹85 lakh while the stamp duty/ready-reckoner value is approximately ₹1.24 crore:

  • which date’s stamp duty value should be considered if there was an earlier notarized agreement and full payment was made in FY 23-24 through banking channels before registration?

5. Revision or Re-computation of Capital Gains

The return for AY 2024–25 has already been filed based on consideration of ₹30 lakh.

If NT’s sale consideration is ultimately determined as ₹42.50 lakh, ₹62 lakh, or any other amount?

Would the matter need to be addressed through any of the following:

  • an updated return under Section 139(8A), if legally available;

  • rectification under Section 154;

  • assessment or reassessment proceedings;

  • revision or other proceedings before the jurisdictional Assessing Officer; or

  • reporting the transaction in AY 2026–27 instead of AY 2024–25, depending on the legally applicable year of transfer?

6. Capital Gains Exemption on New Residential Property

NT purchased the new residential property for ₹64 lakh in December 2023.

If the capital gains are recomputed using a higher sale consideration, can NT continue to claim the applicable exemption under based on the same residential property?

In particular:

  • would the December 2023 purchase fall within the prescribed time limit if the complete transfer is regarded as occurring in October 2023?

  • would it still qualify if the transfer is regarded as occurring only in August 2025 as per registered agreement?

  • can the exemption claim be increased or recomputed during assessment or reassessment proceedings even though the original return claimed exemption based on a lower sale consideration?

7. Most Appropriate Practical Course of Action

From a legal, procedural and practical perspective, what would be the most appropriate course of action to:

  1. correctly determine the year of transfer;

  2. reconcile the AIS reporting;

  3. establish the correct share of sale consideration attributable to NT;

  4. address the possible application of Section 50C;

  5. preserve the eligible capital gains exemption; and

  6. minimise interest, penalty and additional tax exposure?

Thank you in advance for your guidance.