s.56(2)(x) — Money or immovable property received without or for inadequate consideration
Any person who receives money or immovable property free, or immovable property for less than its stamp duty value, is taxed on the value or the shortfall as income from other sources, subject to a tolerance band and exclusions.
Applies to receipts on or after 1 April 2017. The tolerance in sub-clause (b)(B) was five per cent for assessment years 2019-20 and 2020-21 (Finance Act, 2018) and is ten per cent from assessment year 2021-22 (Finance Act, 2020). The counterpart in the Income-tax Act, 2025 is section 92(2)(m), with the exclusions in section 92(3) and the agreement-date and valuation rules in section 92(4).
Income-tax Act, 1961
s.56(2)(x)
Income-tax Act, 2025
s.92(2)(m)
In force from 1 April 2026, but s.536(2)(c) preserves the 1961 Act for tax years beginning before that date.
In short
Section 56(2)(x) of the Income-tax Act, 1961 charges as income from other sources what any person receives from any person on or after 1 April 2017 without consideration or for inadequate consideration. Sub-clause (a) taxes a sum of money received without consideration whose aggregate exceeds fifty thousand rupees. Sub-clause (b)(A) taxes immovable property received without consideration at its stamp duty value where that value exceeds fifty thousand rupees, and sub-clause (b)(B) taxes immovable property received for a consideration on the excess of stamp duty value over the consideration, but only where the excess is more than the higher of fifty thousand rupees and ten per cent of the consideration. That is the tolerance from assessment year 2021-22; for assessment years 2019-20 and 2020-21 it was five per cent, and for assessment year 2018-19 the excess had only to exceed fifty thousand rupees. Twenty per cent applies instead to a residential unit transferred by way of first-time allotment for not more than two crore rupees between 12 November 2020 and 30 June 2021, the case in the second proviso to section 43CA(1). Where the date of the agreement fixing the consideration and the date of registration differ, the stamp duty value on the agreement date may be taken, but only if some part of the consideration was paid by account payee cheque, account payee draft or an electronic mode on or before that date. A stamp duty value disputed on the grounds in section 50C(2) may be referred to a Valuation Officer. The proviso excludes receipts from a relative, on marriage, under a will or by inheritance, in contemplation of death, and by way of a transaction not regarded as transfer under the listed clauses of section 47, among others; none of the thirteen exclusions is written for redevelopment. Property means a capital asset of the assessee, so a flat received as stock-in-trade is outside the clause. Where a value has been taxed under the clause, section 49(4) makes it the cost of acquisition on a later sale. The counterpart in the Income-tax Act, 2025 is section 92(2)(m), with the exclusions in section 92(3) and the agreement-date and valuation rules in section 92(4); the trust, university and hospital limbs are recast as a single registered non-profit organisation limb, and the cost rule moves to serial 17 of the Table in section 73(1).
What the provision does
Taxes the recipient of a gift or a bargain in money or immovable property on the value received free, or on the shortfall below stamp duty value beyond a tolerance band, in the year of receipt. It does not tax a receipt that is itself consideration for something given up, such as a new flat received for the surrender of an old one on the line the Mumbai Tribunal has taken; on two Mumbai Tribunal tenant decisions it does not reach a right to a flat not yet handed over, which defers rather than answers the charge; and it does not apply to stock-in-trade or to the listed exclusions.
Threshold questions
- Has the assessee actually received immovable property, being land or building or both held as a capital asset, in the previous year, as distinct from a right to a flat yet to be built
- Was it received without consideration, or for a consideration, and what was given for it, including an old flat or a tenancy surrendered
- Does the stamp duty value exceed the consideration by more than the higher of fifty thousand rupees and the percentage in force for the year (ten per cent from assessment year 2021-22, five per cent for 2019-20 and 2020-21, none for 2018-19)
- Is any part of the area bought separately for money, and was part of that price paid through a bank on or before an agreement fixing it
- Does the receipt fall within an exclusion, such as from a relative, under a will or by inheritance, or by way of a transaction that section 47 does not regard as transfer
- Has the assessee disputed the stamp duty value so that a reference to the Valuation Officer is available
In practice
The recurring disputes.
The new flat received for the old one
Assessing Officers have added the stamp duty value of a member's new flat, or its excess over the indexed cost of the old flat, under this clause. The Revenue's best statement of the case is the Commissioner (Appeals) in Laxman Kanaiyalal Dharmani: the flat was not free, the consideration was paid in kind by the old flat, that consideration is measured at the indexed cost of the old flat, and the excess of stamp duty value over it is taxable. The Mumbai Tribunal has rejected the addition. In Anil Dattaram Pitale (March 2025) it held that the case was one of extinguishment of the old flat and not a receipt for inadequate consideration; in Dharmani (December 2025) that 961 sq ft received was not without consideration because 623 sq ft had been given up for it; and Amar Narendra Joshi, a single-Member decision on an ex parte assessment, and Bharat Kishin Samtani followed Pitale. The line is consistent but not beyond attack. None of these orders values the old flat against the new under the inadequate-consideration limb, which is where the Revenue's case is strongest when a small flat is exchanged for a much larger one; Dharmani decided the point partly on the pre-2014 text of section 56(2)(vii), the law of the year of the development agreement; Pitale gives no statutory analysis; and in Aparna Sandeep Kulkarni, a builder-flat substitution and not a redevelopment, the Tribunal refused to read in a non-monetary consideration the agreement did not record. No High Court has decided the point.
When the flat is received
The charge falls in the year of receipt. In Snehalata Heramb Dhayagude (April 2026) the Mumbai Tribunal held receipt to be the sine qua non and a right to a flat contingent on completion not to be receipt of immovable property; in Manoj Devshi Chhadva (July 2026) it held that mere execution or registration of a redevelopment agreement creates only a contractual right to obtain a flat in future. Both were tenant cases. The Revenue's argument, put by the Commissioner (Appeals) in Chhadva, is that registration conferred absolute ownership rights in the alternate premises, so the receipt fell in the year of registration. A win on timing defers the question to the year of possession rather than answering it, and the member then needs Pitale on the merits.
Free extra area and purchased extra area
In Bharat Kishin Samtani (June 2026) the Tribunal split the new flat: the area received in exchange, including free area, is outside the clause, while 544.19 sq ft bought at Rs 45,000 a sq ft is within it, and that part was remitted to test the provisos and whether the price matched the ready reckoner rate. Dharmani tested 159 sq ft of purchased area against its own stamp duty value and found the price higher. On the other side, Amar Narendra Joshi deleted the whole addition of Rs 41,38,500, which the Assessing Officer had computed by deducting the price of 140 sq ft of bought area from the stamp duty value of the whole flat, without testing that area separately, which the Revenue will say leaves the point unreasoned; and in Ranjana Hemant Pendharkar (March 2026) the first appellate authority had treated 56 per cent free extra area as consideration for capital gains, a direction the Tribunal set aside for want of a show-cause notice and sent back to that authority without deciding. In Paresh Mulayamchand Panday (May 2026) Rs 1 crore paid for additional area was held not a straightforward purchase comparable with stamp duty valuation, but on a record where the Assessing Officer had not shown what the stamp value related to.
Allotment letters and the agreement-date proviso
A member who fixed the price of extra area by memorandum or allotment letter years before the registered agreement wants the earlier stamp duty value. In Shashi Yogendra Raj Singhvi (March 2023) the Mumbai Tribunal took the date of the allotment letter where it contained all the terms and about a quarter of the price had been paid; in Vinit Ramnath Parkar (May 2026) another Bench held that an allotment letter cannot take the place of a registered and enforceable agreement for sale. In Seema Hasmukh Shah (July 2026) a price of Rs 42 lakh fixed by a 2013 memorandum and paid that October was accepted, without analysis of whether the memorandum fixed the consideration, and in Rama Run Changoiwala (February 2023) an oral agreement was held sufficient under the predecessor clause. The conflict is unresolved, and the second proviso demands a banking payment on or before the agreement in any event.
Tenants and the specific head
For a tenant who receives an ownership flat for surrendering a tenancy, the Tribunal held in Vasant Nagorao Barabde (May 2025), following the Supreme Court in D.P. Sandu Bros., that the surrender is a transfer chargeable as capital gains and section 56 is ruled out; in Varun Jaisingh Asher (March 2026) that the flat is consideration in exchange for the surrender; and in Tushar Uday Talwalkar (August 2026), under the predecessor clause, section 56(2)(vii)(b), that the surrender of a sub-tenancy is itself the consideration. The deletion there rested on two "peculiar facts" taken together, the flat promised directly against the surrender and possession not received in the year (paragraph 18), and the Revenue will say the order goes no further than those facts. Its other arguments are that the tenancy may be a colourable device, as the Assessing Officer was recorded as saying in Asher, and that the legal form of a tenancy deal does not oust the clause where a valuable asset is acquired below stamp value (Panday). Its strongest point is untested: if the surrender is consideration it has a value, and sub-clause (b)(B) asks whether the flat's stamp duty value exceeds it by more than the tolerance, which a small tenancy exchanged for a large flat may do. The occupant must prove the prior right: in Naresh Bansilal Jain (October 2025) a recital calling the assessee an occupant was not enough and the matter was remitted, and in June Alice Fernandes (August 2026), also under section 56(2)(vii)(b), a non-resident buyer's 1988 booking with an earlier builder was not carried into a 2016 purchase in the redeveloped building, and the addition stood.