What this guide covers
People often use the words circle rate and market value as if they mean the same thing. They don’t, and the difference can change how much you pay when you buy or sell a property.
Circle rate is the lowest value the government puts on a property in your area. Market value is the price a real buyer is willing to pay for it today. Circle rate is fixed by the state and changes only from time to time. Market value moves with demand, the condition of the building, the floor and the exact location. When you register a sale, stamp duty is charged on whichever of the two is higher.
The four numbers people mix up
- Circle rate: the rate per sq m or sq ft that the government sets for your zone and type of property.
- Circle rate value: circle rate multiplied by the area of your property.
- Deal price: the price you and the seller agree on, which goes into the sale deed.
- Asking price: the price the seller or a listing first quotes. This often comes down after talks.
Stamp duty is charged on the deal price or circle rate value, whichever is higher. The asking price does not matter for stamp duty at all.
When your price is above circle rate
This is what happens in most city deals. Suppose circle rate value of a flat is ₹62 lakh and you agree to buy it for ₹75 lakh. Stamp duty is charged on ₹75 lakh. In a state with 6% stamp duty, that is ₹4,50,000.
Here circle rate is only a floor, and your stamp duty is charged on your price. It can still matter for TDS if circle rate value is ₹50 lakh or more.
When your price is below circle rate
This happens with old buildings, plots with problems, distress sales or slow markets. Suppose circle rate value is ₹45 lakh and you agree on ₹40 lakh.
- Stamp duty is charged on ₹45 lakh, not ₹40 lakh. At 6%, that is ₹2,70,000 instead of ₹2,40,000.
- The Sub-Registrar may send the deed to the Collector to check the value. If the Collector fixes a higher value, you pay the balance duty, sometimes with a penalty.
- Income tax comes in too. ₹45 lakh is more than 110% of ₹40 lakh, so the seller’s capital gains are calculated as if the sale price were ₹45 lakh. The buyer may also be taxed on the ₹5 lakh gap as income.
If the gap is 10% or less, for example a circle rate value of ₹43 lakh against a price of ₹40 lakh, the income tax rules let it go. Stamp duty is still charged on the higher figure. Our section 50C calculator shows you where your deal stands.
When circle rate is higher than what the property is worth
Circle rates are set for a whole zone, so they don’t always fit every property. An old building, a plot with no proper road or a property with a tenant can be worth much less than its circle rate value. In such cases you are not stuck:
- Before you register, you can ask the Collector of Stamps to decide the correct duty.
- If you get a valuation notice, reply with evidence such as a registered valuer’s report and photos.
- If you disagree with the Collector’s order, you can appeal.
- For income tax, the seller can ask for the value to be checked by a Valuation Officer.
Our guide on how to challenge stamp duty valuation explains each step.
How to compare circle rate with your price
- Find circle rate for your exact zone, not the average for the whole area. Our guide on how to read circle rates shows you how.
- Use the rate for your type of property. A flat uses the residential rate, not the shop or plot rate.
- Use the same unit. If the rate is per sq m and your flat is in sq ft, convert it first.
- Multiply the rate by your area to get circle rate value. The property value calculator does this for you.
- Compare it with your deal price. The higher one is what your stamp duty will be charged on.
Circle rate vs market value: common questions
Can a property be sold below circle rate?
Yes. The sale can be registered, but stamp duty is charged on circle rate value. If the gap is more than 10%, the seller and the buyer may also have to pay extra income tax.
Why is market price usually higher than circle rate?
Because circle rates are revised only from time to time and are set for a whole zone, while market prices move with demand. In busy city areas, prices often run well ahead of circle rate.
Which value does the bank use for a home loan?
Banks get the property valued by their own valuer, who looks at market price. Circle rate on its own does not decide your loan amount.
What if market price is lower than circle rate?
You still pay stamp duty on circle rate value, but you can ask for a fair valuation with evidence such as a registered valuer's report. Courts have said that circle rates are a guide, not the final word on value.
Is it legal to show a lower price in the sale deed?
No. Showing a lower price and paying the rest in cash is illegal. It can lead to penalties for short stamp duty and tax trouble for both the buyer and the seller.