Capital gains tax on JDA (ancestral land for generations)

Dear Sir,

Hope you are doing well !!

1. Yes, your understanding is correct.

There is no GST on sale of complex/ building and ready-to-move-in flats where sale takes place after issue of completion certificate by the competent authority.

2 & 3. It is advisable to get the valuation of the property done from the registered valuer.

Government-approved valuers follow a standard process for the valuation and provide a detailed report.

4.it would be treated as LTCG.

For properties that are acquired/inherited  prior to April 1, 2001, you have the option to take the fair market value of the property as of April 1, 2001, in place of the cost of acquisition. So, the concept of fair market value is important for finding out the cost of acquisition, for capital gains purposes.

You can obtain a valuation report, from a valuer who is registered under the wealth tax rules and who is recognised for determining the fair market value for income tax purposes.

We may assist you for the same.

Hello,

1. No, on the sale of villas after their completion, there would be no GST liability on you.

2. Taxation under the JDA Joint Development Agreement is different as compared to normal capital gain. Here Sec. 45(5A) comes to the scenario. AS per Sec. 45(5A), Capital Gain arising under JDA are taxable in 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, of his share, being land or building or both in the project, 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

Then further Capital Gain liability would arise on the sale of the Villas in the year of the actual sale, Sale Consideration would be actual sale proceeds received and the cost of acquisition would be the Stamp Duty Value considered at the time of completion certificate.

Therefore, you would need the Stamp Duty Value of your share in the project on the date of completion certificate and not the Fair Market Value.

3. As described in Point #2, Capital Gain would be leviable on your share in the project. The Cost of acquisition, for the first instance of Capital Gain, would be the Cost of the Land. Since the property(land) was acquired before 2001, you will need to get a valuation report for the land as on 1st April 2001, which would be your Cost of Acquisition.

4. Long Term Capital Gain.

I hope that this answer satisfies your requirements.

Regards,

CA Hunny Badlani

For further understanding or calculation for the Capital Gain, you can contact us directly or take a phone consultation.

Dear Sir,

Land owner has to pay capital gain tax both the times.

1. At the time of receipt of completion certificate.

2. At the time of sale of that flat.

Capital gain will be taxable when the completion certificate will be issued and sale consideration will be stamp duty value/Market value of flats & Cost of acquisition will be share of flats in land or FMV of land if purchased by you before 2001.

At the time of sale of flats capital gain will be taxable again and that time sale consideration would be actual sales consideration and cost of acquisition would be stamp duty value of flats(taken at the time of completion).

You need to pay capital gain twice first against sale of land and second again sale of flats.

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

Builder will have to pay GST under reverse charge for transfer of development rights.

Fair market value of villa for capital gain calculation would be calculated as the value of similar villa builder would develop and sell as per section 45(5A).

Your capital gain would be sale of land and it's value would be value of similar villas and you can claim exemption of same u/s 54F.

Capital gain long term or short term would depend on the period for which you were holding the land.

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Thank you