Understanding the Full Value of Consideration of capital assets under Business income Head: Clause 53 of the Income Tax Bill, 2025 vs. Section 43CA of the Income-tax Act, 1961

Clause 53 Full value of consideration for transfer of assets other than capital assets in certain cases.

Income Tax Bill, 2025

Introduction

The Income Tax Bill, 2025 introduces Clause 53, which addresses the full value of consideration for the transfer of assets other than capital assets, specifically land or buildings. This clause is significant as it aims to ensure that the profits and gains from such transfers reflect the true economic value, particularly when the consideration received is less than the stamp duty value. In this article, we will explore the objectives, detailed provisions, and practical implications of Clause 53. Additionally, we will conduct a comparative analysis with Section 43CA of the Income-tax Act, 1961, to highlight similarities and differences.

Objective and Purpose

The primary objective of Clause 53 is to prevent tax evasion through undervaluation of property transactions. By deeming the stamp duty value as the full value of consideration when it exceeds the actual consideration, the provision seeks to align the declared transaction value with the economic reality. This legislative intent is rooted in policy considerations to enhance transparency and fairness in the taxation of business profits and gains.

Detailed Analysis

Clause 53 of the Income Tax Bill, 2025

• Sub-section (1): This provision mandates that if the consideration received for the transfer of land or building is less than the stamp duty value, the stamp duty value shall be deemed to be the full value of consideration for computing profits and gains.
• Sub-section (2): An exception is provided where the stamp duty value does not exceed 110% of the consideration received. In such cases, the actual consideration is deemed to be the full value.
• Sub-section (3): Allows the stamp duty value as of the date of the agreement to be considered if the agreement date and registration date differ, provided certain conditions are met.
• Sub-section (4): This provision applies only if the consideration or part thereof is received through specified banking or online modes before the agreement date.
• Sub-section (5): References Section 78(2) and (4) for the determination of the value under sub-section (1).

Section 43CA of the Income-tax Act, 1961

• Sub-section (1): Similar to Clause 53, this provision deems the stamp duty value as the full value of consideration if it exceeds the actual consideration.
• Proviso: An exception is provided where the stamp duty value does not exceed 110% of the consideration. Additionally, a specific provision allows for 120% in certain residential unit transfers during a specified period.
• Sub-section (3): Similar to Clause 53, it allows the stamp duty value as of the agreement date to be considered if the agreement and registration dates differ.
• Sub-section (4): Similar conditions apply regarding the receipt of consideration through specified modes.
• Explanation: Provides a definition for "residential unit," which is not present in Clause 53.

Practical Implications

Clause 53 impacts businesses and individuals engaged in real estate transactions by potentially increasing the taxable income if the declared consideration is less than the stamp duty value. Compliance with the specified modes of payment is crucial to benefit from exceptions. The provision also aligns with anti-evasion measures by curbing undervaluation practices.

Comparative Analysis

Both Clause 53 and Section 43CA aim to address undervaluation in property transactions. However, Clause 53 is more streamlined, lacking the specific provisions for residential units found in Section 43CA. The absence of a definition for "residential unit" in Clause 53 may lead to interpretational challenges. Additionally, Clause 53 references Section 78 for value determination, which is not present in Section 43CA.

Conclusion

Clause 53 of the Income Tax Bill, 2025, and Section 43CA of the Income-tax Act, 1961, both serve to ensure that the consideration for property transactions reflects the true market value for tax purposes. While they share similarities, Clause 53 introduces a more generalized framework without specific provisions for residential units. Future reforms could address potential ambiguities and harmonize the provisions for greater clarity and consistency.

Full Text:

Clause 53 Full value of consideration for transfer of assets other than capital assets in certain cases.

Dated: 8-3-2025