Capital Gains tax and GST on Landowner share of apartments

Hello,

Regarding Income Tax(Capital Gain), Capital Gain would first become chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority; and the stamp duty value, on the date of issue of the said certificate, as increased by the consideration received in cash, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. 

Further at the time of further sale of the apartments, Capital Gain would be taxable, where the cost of acquisition would be the stamp duty value as considered above.

Regarding GST, from the point of view of the landowner, GST would be applicable to the transfer of development rights under RCM (Reverse Charge Mechanism) to be paid by the builder/ developer. 

Further, on the sale of apartments by the landowner, if any consideration for the flat is received before the completion certificate of the flats, then GST would be chargeable on forward basis on the landowner as per the rate applicable to the housing project. 

While if the flat is sold after the completion certificate and consideration fro the same is received after the date of the completion certificate, then GST would be exempt on the sale of such flats.

If you gift the apartments to your brother, Income Tax(Capital Gain) on such transfer of flats to your brother would be exempt, since a gift to a relative as per income tax law is exempt.

It would be advisable to consult a CA for a detailed consultation. 

I hope that this answer satisfies your requirements. For further understanding, you can contact us directly or take a phone consultation.

Regards,

CA Hunny Badlani

Hello Sir,

Here are my replies to your query:

For Capital Gain

1. Proceeds from all three houses will be equally taxable in your hands as well as in your mother's hand or in the as decided at the time of purchase of that land.

2. Whenever you will sale the flats it will be taxable at the rate of 20% if the time gap between the purchase of plot and sale of land is more than 3 years.

3. In case you will transfer the land to any of the relative as mentioned in the income tax act like mother, father, brother and sister in that case there will be no capital gain in your hands. It will be treated as gift and transfer will took place on the basis of the trust deed. But it will be taxable when it will be further sold in hand of that person who has received it as a gift.

4. Either you sale one plot in a year or all there is no benefit of delaying as there is flat taxation rate of 20% without any deduction. 

5. As you mentioned that there no house property in the name of your mother in that case you can do the following:

-Sale all the flats in one financial year.

-Transfer all your proportion of the receipts to your mother as gift.

-So, all the receipts will be taxable in her hand.

- Invest all the amount either in any house property in India or capital gain bonds as mentioned in sec 54EC of the income tax act to claim the full deduction.

For GST

1. In case you will sale the flats after completion then there will be NO GST. GST will be applicable on when you will sale the flats under construction.

Thanks and Regards 

Divya Chugh

Dear Sir,

Hope you are doing well !!

It is advisable to take a phone consultation for detailed discussion.

Capital gain would be paid when the builder gets the completion certificate and transfers the possession.

GST needs to be paid at the same time.

But if you sell the rights in flat before that then you need pay GST on same when you receive any advance for such rights at the rate applicable.

Selling the flat right away wont save much of tax but it would increase complexity in transaction.

Capital gain and GST would be leviable on the transaction between you and builder but no capital gain would be leviable on transaction between you and your brother.

Capital gain would be FMV of similar flat which builder will sell to outside party + cash/ cheque if any received by you over and over the flat from builder and cost would be share of land you transferred to builder.

For detailed information you can have a phone consultation.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you. 

- In case of agreement with the builder, liability to discharge GST is of builder if any. No CG would arise in your hands but you should disclose the transaction in the ITR.

- No CG and GST on gift also.

- If you sell it then CG would arise.