Sale Consideration of Land & Building held as Stock-in-Trade [Section 43CA]
## Section 43CA — Stock-in-Trade Land/Building Sale Consideration
This section is the PGBP-side counterpart to Sec. 50C (which applies to capital assets). For a builder/developer whose land or building is stock-in-trade, the sale price for tax purposes cannot fall below the stamp duty value.
### Basic Rule
```
Sale Consideration = Higher of:
1. Stamp Duty Value (SDV)
2. Actual Sale Price
```
### Safe Harbour — 10% Tolerance
If SDV is up to 110% of sale price (i.e., the difference is ≤ 10%), then:
> Sale Consideration = Actual Sale Price (no substitution).
This tolerance was provided to avoid minor variations in SDV triggering artificial tax additions.
### When Date of Agreement ≠ Date of Registration
This matters because SDV can change between booking and registration (often years apart in real estate):
Situation
SDV to take
Whole or part of consideration received by A/c payee cheque / DD / ECS / electronic mode on or before date of agreement
SDV on date of agreement
Other cases (no advance through banking channel)
SDV on date of registration
This rewards the buyer who pays an advance through banking channels — they get to lock in the SDV at agreement date.
Worked example
### Example 1
Example 1 (Tolerance applies): Builder sells flat for ₹95,00,000. SDV = ₹1,00,00,000.
SDV as % of Sale Price = 1,00,00,000 / 95,00,000 = ~105% (within 110%).
Sale Consideration = ₹95,00,000 (no substitution).
Example 2 (Tolerance exceeded): Same flat, SDV = ₹1,10,00,000.
SDV / Sale Price = 115.7% > 110%.
Sale Consideration = ₹1,10,00,000 (SDV adopted).
Additional ₹15,00,000 taxable as PGBP income.
Example 3 (Date difference + Banking advance):
Agreement date: 1.4.2024 → SDV on that date = ₹40,00,000
Registration date: 1.5.2026 → SDV on that date = ₹55,00,000
Sale price: ₹40,00,000
₹4,00,000 received by RTGS on 1.4.2024 (date of agreement).
→ SDV = ₹40,00,000 (agreement date). Within tolerance → Sale Consideration = ₹40,00,000.
→ Sale Consideration = ₹55,00,000. Additional ₹15,00,000 taxable.
⚠️ Common exam mistakes
Forgetting that the 10% tolerance was earlier 5% — it is now 10% for safe harbour.
Applying Sec. 50C (capital asset) instead of Sec. 43CA — for builders, it's stock-in-trade, so 43CA applies.
Locking in agreement-date SDV without checking that the advance was received via banking channel — cash advances do NOT trigger the agreement-date rule.
Forgetting that the difference (SDV − Sale Price) is taxable as PGBP income under 43CA (not capital gains).
Confusing buyer-side implications: the buyer also faces consequences under Sec. 56(2)(x) if SDV > stated consideration.
Bare-Act text Section 43CA · Income-tax Act, 1961 · click to expand
Section 43CA: (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. Provided that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and ten per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration.