Buying Below Guidance Value at a Bank Auction: The Income-Tax Question

Guidance value, market value and the stamp-duty value

Both States fix a minimum value for land and buildings, area by area, so that stamp duty is not paid on an understated price. In Karnataka it is the guidance value: market value guidelines set by a Central Valuation Committee chaired by the Inspector General of Registration (Karnataka Stamp Act, 1957 s.45B), published by the Department of Stamps and Registration and applied at registration on Kaveri 2.0. In Telangana it is the market value fixed by the Registration and Stamps Department, which you can look up for land or an apartment on the IGRS portal’s Market Value Search.

Income tax borrows that figure. The “stamp-duty value” is the value adopted, assessed or assessable by a State authority for the payment of stamp duty on the property (Income-tax Act, 2025 s.2(105)). “Assessable” matters: it covers the value the authority would have adopted had the document come before it, even where no duty was actually paid on that value.

A SARFAESI auction price is set differently. The bank fixes a reserve price after a valuation by its valuer (Security Interest (Enforcement) Rules, 2002, Rule 8(5)), and the price is whatever the highest bid reaches. Auction prices can sit below government values, which is why the rule below matters to an auction buyer.

The rule: when the gap becomes income

Where any person receives immovable property for a consideration, and its stamp-duty value exceeds the consideration by more than the higher of ₹50,000 and 10% of the consideration, the excess is charged to tax as income from other sources (Income-tax Act, 2025 s.92(2)(m)(ii)(B)). It applies to individuals and to firms and companies alike. The 2025 Act applies from 1 April 2026; a purchase before that falls under the same rule in s.56(2)(x) of the Income-tax Act, 1961, which is the provision the tribunal orders below discuss.

The 10% is a threshold, not a deduction. Once the gap crosses it, the whole gap is taxed, at your slab rate, in the year you receive the property.

Which date’s value: agreement or registration

Where the date of the agreement fixing the price and the date of registration differ, the stamp-duty value on the date of agreement applies, provided some or all of the price was paid by a specified banking or online mode on or before that date (s.92(4)(a)). This matters if values are revised in between — Telangana revised market values with effect from 5 June 2026, as reported, and Karnataka revises guidance values from time to time.

An auction has no agreement to sell in the usual sense. Whether the auction date, the bank’s confirmation of the sale or the sale certificate is treated as the relevant date is not settled by the Act; it is a question for your tax adviser. Paying the EMD and the deposit by bank transfer, as sale notices require anyway, keeps the record clean whichever date is used.

The sale certificate’s duty base: why it does not settle the question

When a buyer presents a SARFAESI sale certificate for registration, stamp duty is charged on the purchase money, not on the guidance or market value. Karnataka charges a certificate of sale the same duty as a conveyance for a market value equal to the purchase money only (Karnataka Stamp Act, Schedule, Article 15(c)). Telangana’s ready reckoner lists a certificate of sale at 5% stamp duty and 0.5% registration fee on a value equal to the purchase money.

It is tempting to read this as closing the gap: if the State charges duty on the price, the price is the value adopted for stamp duty. That argument is available, and it echoes the reasoning in the Mahavir Enterprises order below, which relied on a Maharashtra circular treating the auction price as the value for stamp duty. But the definition also covers the value that is “assessable”, and the Department can point to the guidance or market value. Registration of a sale certificate is not compulsory in any case, so some buyers present nothing to the sub-registrar at all. No order of the Tribunal or a High Court deciding this for a SARFAESI certificate in Karnataka or Telangana was found while preparing this guide. Treat it as open.

What the tribunals have said

1. 1

   Auction price accepted

   A firm bought a property at an e-tender held by a co-operative bank in liquidation, with the process supervised by a senior government functionary acting as liquidator. The first tender, at a higher reserve, drew no bidder; the reserve was revised on a fresh valuation, the tender was advertised, and the firm bid just above it. The Assessing Officer taxed the gap to the stamp-duty value. The first appeal authority deleted the addition, relying in part on a 2022 Supreme Court ruling on court-monitored auctions. The Tribunal upheld that, applying a Maharashtra circular that treats the highest auction price as the value for stamp duty, and held that the price paid by the successful bidder was the fair market value on those facts.

   ITO v. Mahavir Enterprises, ITAT Mumbai, ITA 1304/Mum/2023, 27 Jul 2023

2. 2

   Valuation sent back

   A buyer purchased two units by private agreement from a seller then facing SARFAESI proceedings by its bank, at less than the stamp-duty value. The appeal authority confirmed the addition. The Tribunal did not delete it; it held that the property should have been referred to the Department’s Valuation Officer, and sent the matter back for that valuation.

   ITA No. 4770/Mum/2025, ITAT Mumbai, 28 Nov 2025

Neither order is a SARFAESI auction in Karnataka or Telangana, and tribunal orders turn on their facts. The first shows that a documented, public, supervised sale can carry weight; the second shows that a distress price alone does not end the question, and that valuation is the usual next step.

Disputing the stamp-duty value: the Valuation Officer

If you claim that the stamp-duty value is more than the property’s fair market value, the Assessing Officer may refer the valuation to a Valuation Officer (s.92(4)(b), applying s.78(2); formerly s.56(2)(x) read with s.50C(2)). The reference is available where the stamp-duty value has not already been disputed in an appeal, revision or reference before another authority or court.

The reference works in one direction only. If the Valuation Officer’s figure is higher than the stamp-duty value, the stamp-duty value is used (s.78(3)); if it is lower, the lower figure replaces it. The reference is made by the Assessing Officer, during assessment — it is not a step you can complete before you bid.

The records that support an auction price

• The sale notice as published, with the newspaper and portal dates — evidence that the sale was public.
• The reserve price, and any earlier notices for the same property at a different reserve.
• The bank’s valuation, if the Authorised Officer will give you a copy; the reserve is fixed after it (Rule 8(5)).
• The auction result: the bid history or the portal’s closing record.
• The bank’s confirmation of sale, the sale certificate, and every payment proof for the EMD, the 25% and the balance.
• The guidance or market value for the property on the auction date, saved from Kaveri 2.0 or the IGRS portal.

Pricing it in before the bid

Before you bid, look up the property’s current guidance or market value and compare it with the price you are prepared to pay. If the gap would cross the tolerance, add the possible tax to the all-in cost as a separate line, and take tax advice on your facts before the EMD.

Any such tax comes from your own funds. So does the 25% deposit on winning, including the EMD; a home loan can only fund part of the balance, and a lender can sanction it only after you win, once it has reviewed and valued the property. The same stamp-duty value also feeds the 1% TDS: it applies where the price or the stamp-duty value is ₹50 lakh or more, and is worked on the higher of the two (s.393(1)). So a purchase below ₹50 lakh can still attract TDS if its stamp-duty value crosses that line; our TDS guide covers the detail.

Questions buyers ask

Sources

Statutes, rules and judgments first. Checked as of 17 October 2026; the law and portal practice change, so confirm against the source before relying on a detail.

1. StatuteIncome-tax Act, 2025 — s.92 (incl. s.92(2)(m) and s.92(4))
2. StatuteIncome-tax Act, 2025 — s.78 (Valuation Officer reference)
3. StatuteIncome-tax Act, 2025 — s.2 (s.2(105) “stamp duty value”)
4. JudgmentITO v. Mahavir Enterprises, ITAT Mumbai, ITA 1304/Mum/2023, 27 Jul 2023
5. JudgmentITAT Mumbai, ITA No. 4770/Mum/2025, order of 28 Nov 2025
6. StatuteKarnataka Stamp Act, 1957 — s.45A, s.45B, Schedule Article 15
7. Official portalDepartment of Stamps and Registration, Karnataka — Revised Guidelines Value
8. Official portalKaveri 2.0 — Karnataka online registration services
9. Official portalRegistration and Stamps Department, Telangana — Market Value Search
10. Official portalRegistration and Stamps Department, Telangana — Ready reckoner (certificate of sale)