You sold for less than the circle rate. The tax may be on the circle rate anyway.

When you sell land or a building for less than its circle rate (the government's stamp-duty value for that area), the tax office can treat the circle rate as your sale price. So you get taxed on a bigger gain than the money you actually received. This is Section 50C (becoming Section 78 from April 2026).

There is breathing room, though:

For an NRI it matters twice over, because the inflated gain raises both your tax and the risk that the TDS the buyer took doesn't cover it.

The rule compares your actual sale price with the circle rate on the date of registration.

It's a cliff, not a slope. Cross the 10% line and the entire circle rate applies, not just the slice above 110%.

Two situations let you avoid the deemed value.

First, if the circle rate is simply higher than the property is really worth, maybe it's in poor condition, tied up in a dispute, or the area's circle rates are out of date, you can ask the tax officer to refer it to a Valuation Officer (Section 50C(2)). If the Valuation Officer agrees the fair value is lower, that lower figure is used. And there's no downside to asking: if the Valuation Officer comes back higher than the circle rate, the circle rate still stands.

Second, timing. If you signed an agreement to sell and received part of the payment through a bank on or before the agreement date, you can use the circle rate on the agreement date, not the registration date. That protects you when circle rates rose in between.

For an NRI the sting is double. The buyer's TDS under Section 195 is deducted on the price actually paid, but your taxable gain is computed on the higher deemed value. So the TDS can fall short of your real tax, and you make up the gap in your return.

If you're selling below the circle rate for a genuine reason, plan for it:

A CA who does NRI property sales handles the 50C computation, the valuation challenge, and the return together, so you don't get a demand months later for tax the buyer's TDS never covered.

Q: I sold below the circle rate. Will I be taxed on the circle rate?

A: Only if the circle rate is more than 10% above your actual price. If it's within 110% of what you sold for, your real price stands. Cross that line and the full circle rate becomes your sale value.

Q: How big is the tolerance band?

A: 10%. Section 50C only applies when the circle rate exceeds 110% of your sale price. It was 5% earlier, raised to 10% from AY 2021-22.

Q: The circle rate is way above what the property is worth. Any options?

A: Yes. Ask the tax officer to refer the valuation to a Valuation Officer (Section 50C(2)). If they agree the fair value is lower, that figure is used. A registered valuer's report supports your case.

Q: The circle rate rose between my agreement and registration. Which date counts?

A: If you had an agreement to sell and received part payment through a bank on or before the agreement date, the circle rate on the agreement date can be used, not the registration-date value.

Q: Does this affect my TDS as an NRI?

A: It can. The buyer's Section 195 TDS is on the price paid, but your taxable gain uses the higher deemed value, so the TDS can fall short and you pay the balance in your return.

Q: Is the buyer affected?

A: Yes. If the buyer pays below the circle rate by more than the higher of ₹50,000 or 10% of the price, the whole difference can be taxed as their income (Section 56(2)(x)). It's a shared problem.