Full Value of Consideration: Stamp Duty Value and Fair Market Value Rules (Income-tax Act, 2025)

Capital gains are worked out from the "full value of consideration", normally the price you actually got. Under the Income-tax Act, 2025, three sections can replace that price with a deemed value: section 78 (land or building sold below stamp duty value), section 79 (unquoted shares sold below fair market value) and section 80 (consideration that cannot be determined). For land or building, the actual price is still accepted when the stamp duty value is not more than 110% of it.

This guide explains each rule, the 110% band, the agreement-date option, the valuation reference, and the exceptions, with worked figures. It reflects the Act as amended by the Finance Act, 2026 and the Income-tax Rules, 2026. Every example uses tax year 2026-27 and is checked against the text of the sections and rules named next to it. The old-law equivalents are not mapped here because they were not verified from an official source for this article. Section 78 deals with the seller of a capital asset; the buyer's side is covered in the section on stock-in-trade land and the buyer.

What is "full value of consideration" and why does it matter?

Under section 72(1), income under the head "Capital gains" is the full value of the consideration received or accruing from the transfer, less (a) expenditure incurred wholly and exclusively in connection with the transfer and (b) the cost of acquisition and cost of any improvement. If the first number is replaced by a higher deemed value, the gain goes up even though you received less cash.

Sections 78, 79 and 80 only change that first number. Cost, expenses and exemptions are worked out in the usual way.

Section	Asset	Trigger	Deemed full value
78(1)	Land or building or both	Consideration is less than stamp duty value	Stamp duty value (subject to the 110% band and the agreement-date option)
79(1)	Shares other than quoted shares	Consideration is less than fair market value	Fair market value as prescribed
80	Any capital asset	Consideration is not ascertainable or cannot be determined	Fair market value on the date of transfer

What does section 78 say about land and building sold below stamp duty value?

"Stamp duty value" is, under section 2(105), the value adopted, assessed or assessable by any authority of the Central or State Government for payment of stamp duty on an immovable property. Under section 78(1), if the consideration for transferring land or building (or both) is less than the stamp duty value, the stamp duty value is treated as the full value of consideration for section 72. Two relaxations apply:

• The 110% band, section 78(1)(b). If the stamp duty value does not exceed 110% of the consideration received or accruing, the actual consideration is the full value of consideration.
• The agreement date, section 78(1)(a). The stamp duty value on the date of the agreement may be taken, if (i) the agreement date and the registration date are not the same, and (ii) part or full consideration was received on or before the agreement date in "specified banking or online mode".

Section 66(32) defines specified banking or online mode as an account payee cheque, an account payee bank draft, or electronic clearing system through a bank account, or another electronic mode that may be prescribed. Cash does not qualify.

How does the 110% band work? A worked example

Assumptions (tax year 2026-27): Meena sells a plot for Rs 80,00,000. The stamp duty value on the date of transfer is Rs 85,00,000. Her cost of acquisition is Rs 50,00,000 and the expenses on transfer are Rs 1,00,000. Rs 85,00,000 against Rs 80,00,000 is the case to test.

Step	Working	Rs
1. Is consideration below stamp duty value?	80,00,000 < 85,00,000, yes
2. 110% of consideration	80,00,000 x 110%	88,00,000
3. Does stamp duty value exceed 110%?	85,00,000 does not exceed 88,00,000	No
4. Full value of consideration	Actual consideration, section 78(1)(b)	80,00,000
5. Less expenses on transfer		1,00,000
6. Less cost of acquisition		50,00,000
Capital gain	80,00,000 - 1,00,000 - 50,00,000	29,00,000

Whether this is short-term or long-term, and the tax rate that follows, are covered in the sections on capital gains and are not affected by section 78.

What happens when the stamp duty value is more than 110% of the price?

Assumptions (tax year 2026-27): Ravi sells a flat for Rs 60,00,000. The stamp duty value is Rs 75,00,000. His cost of acquisition is Rs 40,00,000 and transfer expenses are Rs 60,000.

Step	Working	Rs
1. 110% of consideration	60,00,000 x 110%	66,00,000
2. Stamp duty value vs 110%	75,00,000 exceeds 66,00,000	Band lost
3. Full value of consideration	Stamp duty value, section 78(1)	75,00,000
4. Less expenses and cost	60,000 + 40,00,000	40,60,000
Capital gain	75,00,000 - 40,60,000	34,40,000

Had the actual price been accepted, the gain would have been Rs 19,40,000 (60,00,000 - 40,60,000). The band is not a deduction of 10%. Once the stamp duty value crosses 110% of the price, the whole stamp duty value is used, not just the excess.

Which stamp duty value applies if the agreement and registration dates differ?

Property deals often sign an agreement months before registration, and circle rates may rise in between. Section 78(1)(a) lets you use the value on the agreement date, but only if money was received on or before that date in specified banking or online mode.

Assumptions (tax year 2026-27): Anita signs an agreement on 1 August 2026 to sell land for Rs 62,00,000 and receives Rs 5,00,000 by account payee cheque the same day. The sale deed is registered on 15 December 2026. Stamp duty value is Rs 70,00,000 on 1 August and Rs 78,00,000 on 15 December.

1. The dates differ and part consideration was received on the agreement date by cheque, so section 78(1)(a) is available. The relevant stamp duty value is Rs 70,00,000, not Rs 78,00,000.
2. 110% of Rs 62,00,000 is Rs 68,20,000. Rs 70,00,000 exceeds it, so the band does not help.
3. Full value of consideration is Rs 70,00,000. Without the agreement-date option it would have been Rs 78,00,000, a difference of Rs 8,00,000 in the gain computation.

If the Rs 5,00,000 had been paid in cash, step 1 would fail and the December value would apply.

Can I challenge the stamp duty value? What is the valuation reference?

Yes, in a limited way. Under section 78(2), the Assessing Officer may refer the valuation to a Valuation Officer where (a) the assessee claims the stamp duty value exceeds the fair market value on the date of transfer, and (b) the stamp duty value has not been disputed in any appeal or revision, and no reference has been made before any other authority, court or the High Court. Section 269(3) to (8) then applies with the necessary modifications: the Valuation Officer may inspect the property after at least two days' written notice, takes the assessee's evidence into account after giving a hearing, and sends the report to the Assessing Officer and the assessee.

Section 78(3) adds a safeguard in the Revenue's favour. If the Valuation Officer's value exceeds the stamp duty value, the stamp duty value is taken as the full value of consideration. A reference cannot push the figure above the stamp duty value.

Rule 173 decides which officer handles the file, using the stamp duty value of the asset where the reference is under section 78(2):

Value of asset	Officer (rule 173(1)(c))
Up to Rs 1 crore	Assistant Valuation Officer
More than Rs 1 crore, up to Rs 5 crore	Valuation Officer
More than Rs 5 crore	District Valuation Officer

Rule 173(7) says the value is that of the asset as a whole, even if it is owned jointly. Under section 269(9), the report is due within six months from the end of the month in which the reference is made.

What does section 79 say about unquoted shares sold below fair market value?

Under section 79(1), if the consideration for transferring shares of a company, other than quoted shares, is less than their fair market value determined in the prescribed manner, that fair market value is the full value of consideration. A "quoted share" (section 79(3)) is a share quoted on a recognised stock exchange with regularity, where the quotation is based on current transactions in the ordinary course of business.

Rule 56(i) fixes the valuation date as the date on which the shares are transferred. Section 79 leaves the method to the rules. Rule 57 (Table, Sl. No. 4, which lists sections 26(2)(j), 72 and 92) gives the formula for unquoted equity shares, and it is the rule the valuation date in rule 56 points to for this purpose:

FMV = (A + B + C + D - L) x PV / PE

Letter	Meaning (rule 57)
A	Book value of assets other than jewellery, artistic work, shares, securities and immovable property, reduced by income-tax paid (less refund claimed) and by amounts shown as assets that do not represent any asset value
B	Open-market price of jewellery and artistic work, per a registered valuer's report
C	Fair market value of shares and securities, as determined under the rule
D	Stamp duty value of immovable property
L	Book value of liabilities, excluding items such as paid-up equity capital, undeclared dividends, reserves and surplus, provisions for unascertained liabilities and contingent liabilities
PV / PE	Paid-up value of the equity shares transferred / total paid-up equity share capital

Rule 57 (Table, Sl. No. 5) values other unquoted shares and securities at the price they would fetch in the open market on the valuation date, and the assessee may obtain a report from a merchant banker or an accountant.

Worked example, tax year 2026-27. Karan sells equity shares of an unlisted private company for Rs 12,00,000. Assume the company's total paid-up equity capital (PE) is Rs 10,00,000 and the shares Karan sells have a paid-up value (PV) of Rs 1,00,000, which is 10%. From the company's audited balance sheet on the transfer date, after the adjustments rule 57 requires: A = Rs 1,20,00,000; B = nil; C = Rs 10,00,000; D = Rs 70,00,000; L = Rs 40,00,000.

Step	Working	Rs
1. A + B + C + D - L	1,20,00,000 + 0 + 10,00,000 + 70,00,000 - 40,00,000	1,60,00,000
2. PV / PE	1,00,000 / 10,00,000	10%
3. Fair market value	1,60,00,000 x 10%	16,00,000
4. Consideration received		12,00,000
Full value of consideration	Consideration is below FMV, so FMV applies, section 79(1)	16,00,000

Karan's capital gain is computed on Rs 16,00,000, not Rs 12,00,000. Unlike section 78, section 79 has no 110% tolerance band in its text.

When does section 79 not apply?

Section 79(2) lets the rules exempt a class of persons, on conditions. Rule 58(2) says section 79 does not apply to the transfer of movable property of the nature in rule 58(1), Table Sl. No. 2, where the conditions there are met. That entry covers unquoted shares of a company or its subsidiary, received by a shareholder under a resolution plan approved by the Tribunal under section 242 of the Companies Act, 2013, after the Tribunal had suspended the board on the Central Government's application under section 241 and appointed Government-nominated directors. This is a narrow situation. Read rule 58 in full before relying on it.

What does section 80 do when the price cannot be determined?

Section 80 applies to any capital asset. If the consideration received or accruing from the transfer is not ascertainable or cannot be determined, the fair market value on the date of transfer is deemed to be the full value of consideration for computing income under the head "Capital gains".

Scenario. Sunita gives her plot to a builder, and the arrangement does not fix any price for what she gets back. There is no number to put as the sale price. Section 80 steps in: she uses the fair market value of the plot on the date of transfer. For land, rule 57 (Table, Sl. No. 6) values immovable property at the value adopted or assessed by the Government authority for stamp duty on the valuation date, but that entry is listed against section 26(2)(j) in the rule, so confirm which method applies to your asset before filing.

Quick scenarios in plain language

Ravi sells ancestral land to a cousin at a "family price". The registered price is 5% under the stamp duty value. That is inside the 110% band, so Ravi's gain is computed on the price he actually got. If the gap had been 15%, the stamp duty value would have been the figure.

Meena, selling a plot, receives a token advance in cash and the rest at registration. The agreement was months earlier and circle rates have risen since. Because the advance was cash, the agreement-date option under section 78(1)(a)(ii) is not available to the seller, and the later, higher stamp duty value is tested against the 110% band.

Does the same stamp duty rule apply to stock-in-trade land and to the buyer?

Land held as stock-in-trade (section 53). Section 78 covers capital assets. For land or building that is not a capital asset, such as a builder's inventory, section 53(1) applies the same idea: if consideration is less than the stamp duty value, the stamp duty value is the full value of consideration for computing profits. Section 53(2) gives the same 110% tolerance, section 53(3) and (4) allow the agreement-date value where money was received in specified banking or online mode on or before that date, and section 53(5) applies section 78(2) and (3) for the valuation reference.

The buyer (section 92(2)(m)(ii)). The buyer can be taxed too under "Income from other sources". For immovable property received for a consideration, the amount by which the stamp duty value exceeds the consideration is income if that excess is more than the higher of Rs 50,000 or 10% of the consideration. Where property is received without consideration, the stamp duty value is income if it exceeds Rs 50,000. Section 92(3) lists receipts outside this rule, including those from a relative, under a will or inheritance, and on marriage. Section 92(4) gives the buyer the agreement-date value on the same banking-mode condition and the same valuation reference route as section 78(2).

Common mistakes

• Treating 110% as a tax-free cushion. It is a test. Fail it by one rupee and the full stamp duty value is used.
• Using the registration-date value by default. If dates differ and a banking-mode advance was received on or before the agreement date, the agreement-date value may be taken.
• Taking the advance in cash. It defeats the agreement-date option.
• Applying section 78 to shares or other assets. It covers land or building only. Unquoted shares fall under section 79.
• Seeking a valuation reference after the value is already in dispute. Section 78(2)(b) is not met if the stamp duty value has been disputed in an appeal or revision or has been referred elsewhere.
• Ignoring the buyer's side. Section 78 fixes the seller's figure. The buyer is tested separately under section 92(2)(m)(ii), so a low registered price can create tax for both parties.

Quick reference

Point	Rule	Reference
Land/building sold below stamp duty value	Stamp duty value is full value of consideration	Section 78(1)
Tolerance	Actual price used if stamp duty value is not above 110% of it	Section 78(1)(b)
Agreement-date value	Dates differ and banking-mode payment on or before agreement date	Section 78(1)(a)
Valuation reference	Claim that stamp duty value exceeds FMV; no other dispute pending	Section 78(2)
Higher Valuation Officer value	Stamp duty value is used	Section 78(3)
Unquoted shares below FMV	FMV is full value of consideration	Section 79(1), rule 57
Consideration not determinable	FMV on date of transfer	Section 80
Valuation Officer report time	Six months from end of month of reference	Section 269(9)

Where this is in the Act

• Section 72(1): computation of capital gains from the full value of consideration.
• Section 78(1) to (3): land or building and stamp duty value; 110% band; agreement date; valuation reference.
• Section 79(1) to (3): unquoted shares and fair market value; prescribed exceptions; meaning of quoted share.
• Section 80: fair market value where consideration cannot be determined.
• Section 66(32): specified banking or online mode.
• Section 269(3) to (9): powers and procedure of the Valuation Officer.
• Rules 56, 57 and 58: valuation date, fair market value methods, and classes outside section 79.
• Rule 173: jurisdiction of Valuation Officers.

If you want to see how holding period and rates apply once the full value is fixed, read tax on long-term capital gains and tax on short-term capital gains.

For a CA firm, the practical work is collecting the agreement date, registration date, payment mode and both stamp duty values for each property client before computing gains. Finexo's practice management software helps track these document requests and filing deadlines across your client book. It does not compute capital gains or value property for you.

This article explains the Income-tax Act, 2025 (as amended by the Finance Act, 2026) and the Income-tax Rules, 2026. It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.