• Capital gain tax to landowner in JDA

Dear Sir / Ma'am,

I inherited the land from my father who in turn inherited. So the cost of the land falls well before 1981. In Oct 2015, I did the Joint Development Agreement with the builder to construct the residential apartment on the land. I did not contribute in construction. All the costs of constructions were born by the builder. Till today we have not received the Certificate Of Completion. Now my question is ;

1. Do we, as landowners, have the liability to pay capital gain tax as JDA was done in 2015?
2. Will, the new law (2017) which allows the Cap. gain tax to be levied after the certificate of completion, be applicable to our case? 
3. How can we calculate the full value of consideration of our ancestral property? Is the cost of construction as per the JDA ? 

Answers will be highly appreciated.

Many thanks,

Aditya
Asked 5 years ago in Capital Gains Tax

Dear Sir,

1) Yes you need to pay capital gain tax after claiming exemption of your own share.

2) Yes applicable if no sale done by you before receiving of completion certificate.

3) You need to calculate cost of land and construction of your share.

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

Hi Aditya,

Hope you are doing well !

Let me know you are asking about GST or capital gain tax.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

1. Land owner has to pay capital gain tax both the times (I.e. at the time of receipt of completion certificate and at the time of sale of that flat).

2.Capital gain will be taxable when the completion certificate will be issued.

3.Capital gain at the time of sale of any of the flat will be calculated by deducting stamp duty value of the flat (taken at the time of completion) from actual sale consideration.Cost of acquisition will be your share in land or FMV of land if purchased by ancestors before 2001.

Capital gain at the time of completion certificate would be calculated by deducting total land cost from the stamp duty value/market value of flat received by land owner.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

1. Do we, as landowners, have the liability to pay capital gain tax as JDA was done in 2015?

ANS. IN YOUR CASE CAPITAL GAIN TAX LIABILITY WILL ARISE ON THE DATE ON WHICH YOUR WILL HANDED OVER THE PASSION OF LAND TO BUILDER FOR DEVELOPMENT WORK IF THE WORK WILL STATED IN YEAR 2015 THEN TAX LIABILITY WILL ARISE ON 15-16

IF YOU NOT HANDED OVER THE PASSION OF LAND THEN YOUR CASE TAX LIABILITY ARISE ON THE COMPLETION CERTIFICATE RECEIVED

2. Will, the new law (2017) which allows the Cap. gain tax to be levied after the certificate of completion, be applicable to our case?

ANS . SEE THE ANS OF 1

3. How can we calculate the full value of consideration of our ancestral property? Is the cost of construction as per the JDA ?

ANS. CONSIDERATION WILL BE THE FARE MARKET VALUE OF NEW PROPERTY RECEIVED BY YOU

Bhadresh S Mevada
CA, Surat
49 Answers

Not rated

Dear Sir,

You need to pay tax in the year when completion certificate will be received except when you sale the property under JDA before receiving of certificate.

Section 45(5A) is applicable in your case.

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

Hi,

Yes, section 45 (5A) is applicable.

Just find below the link for your reference:

https://thetaxtalk.com/2018/01/07/section-455a-new-simplified-mode-taxation-joint-development/

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Hi,

Please find below the response to your queries.

1. Yes. You will need to pay Capital Gains tax.

2. Yes

3. You can get the FMV of the land done and add to it your share of the construction cost.

Hope that clarifies.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

there is change in section 45(5) with effect from 01.04.2018 to has provision is apply before that

Bhadresh S Mevada
CA, Surat
49 Answers

Not rated

Hi Aditya

1 n 2. Since your JDA was entered into in the pre amendment period, your capital gain liability arose in 2015 itself. But, since you have not paid any capital gain taxes, now you can consider treatment as per new law and pay capital gain taxes on completion. You may receive notice for such default, but this is the best that you can do right now.

3. The sales consideration shall be stamp duty value of your share of flats received as on the date of completion.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

Hi Aditya

You were liable to capital gain tax in FY 15-16 only. However, if you haven't paid the taxes, follow the new law now and pay taxes in the year of completion.

The full value of consideration share shall be the FMV of your I.e. landlord's share of flats.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

Dear Sir,

In Oct 2015, you did the Joint Development Agreement with the builder to construct the residential apartment on the land. So, your are liable for capital gain tax from 2015.

However, You have not paid any capital gain taxes in previous years so you can take the benefit of new law i.e.45 (5A). Accordingly you need to pay capital gain tax in the year of completion.

The Full value of consideration shall be the fair market value.

Warm Regards,

Karishma Chhajer

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

You were liable to pay capital gain tax in 2015-16 but now you can pay it after completion.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

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