Start with the correct period and asset
This guide concerns a land or building capital-asset transfer in tax year 2026–27 under the Income-tax Act, 2025, as amended by the Finance Act, 2026. Section 78 supplies a deemed consideration for section 72. It is not a calculation of the final capital-gains tax, and it is not a substitute for examining whether the property is trading stock. A computation for FY 2025–26 belongs to the earlier enactment and must not inherit these section numbers mechanically. Income Tax Department: 2025 Act as amended by Finance Act, 2026, section 78.
Make the boundary test explicit
Where section 78 applies, compare actual consideration with the relevant stamp duty value. If that value does not exceed 110% of consideration, actual consideration is used. At exactly 110% the condition is met. Above the boundary, do not subtract a ten-per-cent allowance from the stamp value: the concession is a threshold test, not a slab deduction. Preserve the unrounded values in the working before displaying a percentage. Income Tax Department: 2025 Act as amended by Finance Act, 2026, section 78.
Build the agreement-date evidence file
Where the consideration-fixing agreement and registration dates differ, section 78(1)(a) permits the agreement-date stamp value if part or full consideration was received on or before the agreement date in the specified banking or online mode defined in section 66(32). Obtain the dated agreement, actual receipt evidence and the applicable valuation record together. Merely having signed an earlier agreement does not prove the payment condition. Record which statutory mode the evidence establishes rather than describing every electronic transfer as qualifying without checking it. Income Tax Department: 2025 Act as amended by Finance Act, 2026, section 78.
Keep a valuation reference separate
Section 78(2) allows the Assessing Officer to refer valuation where the assessee claims the stamp value exceeds transfer-date fair market value and the stated dispute/reference conditions are satisfied. Explain the claim with property-specific evidence and disclose other proceedings. An internal valuation spreadsheet does not itself constitute the statutory reference or guarantee that one will be made. If the Valuation Officer's value exceeds the stamp value, subsection (3) limits the consideration to the stamp value. Income Tax Department: 2025 Act as amended by Finance Act, 2026, section 78.
Prepare a reproducible computation
Use separate columns for contract consideration, registration-date value, eligible agreement-date value, threshold result and any reference outcome. Attach evidence references to each input. A reviewer should be able to reproduce the selected consideration without guessing whether an amount is in rupees or lakh. Maintain acquisition cost, transfer expenditure, holding period and any exemption analysis in separate supported workings; none is calculated here. Income Tax Department: 2025 Act as amended by Finance Act, 2026, section 78.
Resolve exceptions before signing
If asset classification, receipt timing or another valuation proceeding is uncertain, identify the unresolved fact in the review memo. Do not silently choose the lowest available value. These illustrations assume an otherwise covered capital asset and no separate provision changing the result. They demonstrate the consideration selection only, with amounts in lakh rupees and no assumed tax rate. Income Tax Department: 2025 Act as amended by Finance Act, 2026, section 78.
Applicable primary references
Income Tax Department: 2025 Act as amended by Finance Act, 2026, section 78
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Equality at the boundary
Consideration is ₹100 lakh and relevant stamp value is ₹110 lakh. The limit is 100 × 110% = ₹110 lakh. Equality qualifies, so the selected full value is ₹100 lakh.
Illustrative example 2: Just above the boundary
Consideration is ₹100 lakh and stamp value is ₹111 lakh. Because 111 exceeds 110, the assumed ordinary section 78 result is ₹111 lakh, an uplift of ₹11 lakh. It is not an uplift of only ₹1 lakh.
Illustrative example 3: Qualifying agreement-date receipt
A company agrees on 15 April 2026 to sell for ₹100 lakh, receives a qualifying-mode advance on 14 April, and registers on 20 August. Agreement-date stamp value is ₹108 lakh and registration-date value ₹130 lakh. Assuming the agreement-date conditions are established, 108 is within 110, so actual ₹100 lakh is selected.
Illustrative example 4: Receipt after the agreement
Change only the advance date to 16 April 2026. The on-or-before condition is not established. With no other qualifying receipt or relief assumed, registration-date ₹130 lakh exceeds the ₹110 lakh boundary and the selected value is ₹130 lakh.
Illustrative example 5: Lower reference valuation
Actual consideration is ₹100 lakh, stamp value ₹125 lakh and the supported outcome of a valid statutory reference is ₹115 lakh. On those stipulated facts, the reference working selects ₹115 lakh, ₹10 lakh below the original stamp value.
Illustrative example 6: Reference value above stamp value
Keep actual ₹100 lakh and stamp value ₹125 lakh, but assume a Valuation Officer value of ₹135 lakh. Subsection (3) caps the selected consideration at ₹125 lakh, avoiding a further ₹10 lakh increase.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify period | Document the transfer date and applicable enactment. |
| 2 | Classify the property | Support capital-asset status rather than assuming it from the ledger name. |
| 3 | Confirm consideration | Tie the amount received or accruing to the executed terms. |
| 4 | Obtain stamp records | Keep valuation evidence for the relevant property and dates. |
| 5 | Compare agreement and registration | Record both dates and the consideration-fixing document. |
| 6 | Trace advance receipt | Retain bank evidence, receipt date and the supported statutory mode. |
| 7 | Select the relevant stamp value | Explain why agreement-date treatment is or is not available. |
| 8 | Run the exact threshold test | Compare unrounded value with 110% of consideration. |
| 9 | Review valuation proceedings | Document the fair-value claim, other disputes and actual reference outcome. |
| 10 | Approve the final bridge | Reconcile selected consideration to the separate capital-gains computation. |
Sixteen practitioner FAQs
1. Does this guide cover FY 2025–26 returns?
No. Its section references are for tax year 2026–27 under the 2025 Act.
2. What classification evidence should be retained?
The acquisition purpose, actual use, accounts and transaction documents supporting capital-asset treatment.
3. Is exactly 110% outside the concession?
No; equality satisfies the stated boundary.
4. Should the percentage be rounded first?
Keep original amounts and compare them before display rounding.
5. Is the ten-per-cent margin a deduction?
No. The ₹111 lakh example shows why a slab-style calculation fails.
6. Does an earlier agreement alone settle the value?
No. Build the accompanying receipt evidence file.
7. Can a later advance prove an earlier receipt?
No. Use the actual receipt chronology.
8. What if a payment description is vague?
Identify the mode from reliable evidence and check the statutory definition before signing.
9. Should both stamp records be kept?
Yes. It makes the reason for selecting the relevant date reviewable.
10. Does a private valuation automatically replace the stamp figure?
No. Distinguish supporting evidence from an actual statutory reference outcome.
11. Should another valuation appeal be disclosed?
Yes. It is relevant to the subsection (2) conditions.
12. Can a reference increase this working above stamp value?
Subsection (3) supplies the cap illustrated above.
13. Do these examples calculate taxable gains?
No. They isolate full-value selection.
14. Can the selected amount replace the contract price in every ledger?
No. This tax computation does not by itself determine accounting entries or contractual recovery.
15. How should an uncertain asset classification be handled?
Resolve it from the facts and applicable law before choosing a computational route.
16. What is the most useful final review document?
A dated input-to-result bridge with evidence references and separately identified unresolved matters.
Conclusion
For tax year 2026–27, test capital-asset status, the exact 110% boundary and agreement-date payment evidence before selecting the property-transfer consideration.