Real Estate Mumbai

Buying Property Below Market Value? Tax Notice Risk

2026-09-27 · GeoSquare News Scraper

Several Maharashtra homebuyers are learning the hard way that a bargain price on paper can turn into a tax demand later. If a property is registered well below its prevailing market or stamp duty value, the Income Tax Department can treat the gap as unaccounted income of the buyer, not the seller.

Why a discount invites scrutiny

Under Section 56(2)(x) of the Income Tax Act, if you buy immovable property for less than its stamp duty value, the difference is taxed as income from other sources — provided it exceeds the higher of Rs 50,000 or 10 per cent of the actual consideration. A buyer who paid the principal demand may still face interest and penalty proceedings if the transaction is reopened.

Maharashtra's ready reckoner benchmark

In Maharashtra, the ready reckoner rate is the state's minimum valuation benchmark for stamp duty and registration. Deals struck below this rate — common in resale, redevelopment and family transfers — are flagged during processing. Mumbai and Pune registrations are especially prone to mismatch notices because circle rates often lag actual market rates in prime pockets.

What buyers should do

Keep your agreement, payment trail, valuation report and Form 26QB TDS challan ready. If the consideration is genuinely below the ready reckoner rate, document the reason — distressed sale, structural defects, litigation or an old tenancy — before registration. Where the gap is large, a chartered accountant's opinion before signing is cheaper than a reassessment later.

The bottom line

A low registry value reduces stamp duty today but can raise your tax outgo, weaken your resale documentation and complicate home loan eligibility. For investors in Maharashtra, matching the agreement value to the ready reckoner rate — or justifying the difference in writing — remains the safer route.