property purchase lessthan fair market value

While taxing income from capital gains (section 50C), business profits (section 43CA) (for Seller)

and other sources (section 56) (over purchaser) arising out of transactions in immovable property, the sale consideration or stamp duty value, whichever is higher is adopted.

The difference is taxed as income both in the hands of the purchaser and the seller. 

A relief has been provided by Finance act 2018,  by allowing the value of the property up to 5% below circle rates for calculation of stamp duty and capital gains tax. 

In the example, 17.5 lakhs will be added in the capital gains of seller (AY 2019-20), while same will be added as IFOS to buyer.

Yes.

"" Following item (B) has been substituted for the earlier item (B) of sub-clause (b) of clause (x) of sub-section (2) of section 56 by the Finance Act, 2018, w.e.f. 1-4-2019 :

(B) 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 five per cent of the consideration:"""

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