Effects of Jantri rates on Capital Gains

Section 50 C of Income Tax Act,1961 was inserted from Finance Act, 2002 w.e.f. 1st April, 2003 which states that While transferring any land or building or both if full sale value consideration is less than value adopted or assessed (Jantri Rates) by Stamp valuation authority (which is a revenue department of the state)for the purpose of payment of stamp duty in respects of this transfer than value so adopted or assessed will be taken as full value of consideration for computing capital gain Hence it is very important to evaluate the effects of Jantri rates on Capital Gains.

However if assesse can prove to assessing officer that the value so adopted or assessed by stamp value authority is higher than fair market value than fair market value will be taken as Full value of consideration for calculating capital gain.

Revenue department prepare Jantri rates (Ready Reckoner) to collect stamp duty base on Jantri Rates. Jantri rates are prepared after considering various factors relate to property where it is located. Jantri rates for a property can be found by ward number and survey number of property

Due to recent increase in Jantri in Gujarat from 1st April, 2011, stamp duty expenses will be increase on new property transactions. Persons who brought property at older Jantri rates and hold the property will have to bear more capital gain due to increase value of property as per new Jantri rates while selling the same.

As New provisions of Section 50 C of Income Tax Act, 1961, Full Sale value of the property cannot be less than Jantri rates unless assessee can proveto assessing officer that it is greater than fair market value of property than fair market value will be taken as sale consideration for computation of Capital Gains.

State Government try to bring more transparency in real estate transactions by increasing Jantri rates but it will increase cost of property due increase in stamp duty and in some cases  long term/short term capital gains. !

Update:

Gujarat Government has once again increased jantri rates from 5th Feb,2023. They double the jantri rates which were declared in 2011. This will impact current property transactions. It increases the cost of property and stamp duty cost for buyers. Further sellers also will be required to pay higher capital gain.

If Jantri rates are in line with market value of property, it will really help salaried class and compliant taxpayers who are having major income from the banking channel . This is a welcome step for all . Even buyers when they will sell this property after 5 to 10 years (upgrade from say 2 BHK to 3BHK), they will benefit from the cost of indexation on higher purchase value . This will help them to reduce their capital gain and reduce tax liability.

(Original post published on 18th Jun,2012, same is updated on 08th Feb,2023 )