Capital Gains Tax Liability

Capital Gains Tax Liability

My father bought one 3000 square yards of land in the year 1970 in Hyderabad. On his demise I have inherited the same from him in the year 2001. Now I propose to enter into JDA with builder in April 2020 for developing the 3000 square yards land and constructing a residential complex having total built-up area of say 1,00,000 sft. The consideration for entering JDA is that the builder should handover 50% of the built-up area (i.e. 50,000 sft) to me. The builder is likely to finish the project, obtain completion certificate and handover my portion of built-up area in April 2022. The land acquisition value in 1970 (when my father acquired) and 2001 (when I inherited) is not known. Present value of the land is Rs.4,500/- per square yard. Present market (April 2020) value of built-up area is Rs.1,700 per sft. Let us assume that the prevailing market value in April 2022 may be Rs.1,800/- per sft. I am not intending to sell my portion of built-up area for another 5 years. What would be my Capital Gains Liability when the project is completed and handed over to me with completion certificate in April 2022?

Asked 4 years ago in Capital Gains Tax

Capital gain tax would be calculated as under:

sale price of similar residential complex as provided to you and cost of acquisition i.e. FMV as on 01.04.2001 of land transferred to builder equivalent to build up area he is owning.

Thus you will be required to pay tax in 2022 when you receive the possession of house and you need to take valuation of land from government approved valuer for 01.04.2001.

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

Thank you.

Naman Maloo

CA, Jaipur

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Dear Sir,

Hope you are dong well !!

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

At the time of receipt of completion certificate.

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 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 stamp duty actual sales consideration and cost of acquisition would be stamp duty value of the flat (taken at the time of completion) .

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

Payal Chhajed

CA, Mumbai

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Say the land value as on 01/04/2001 was Rs.1,500/- per square yard. Say sale price of similar residential complex as on 01/04/2001 was Rs.600/- per sft of built-up area. What would be my Capital Gains Tax Liability in April 2020?

Asked 4 years ago

We need to sale price of similar complex as on 01.04.2022 (assumed transfer date).

Let me assume it at 1600 sq. ft.

So capital gain would be 1600*50000 equals to 8 crore.

Indexed cost of acquisition would be 1500*1500 equals to 2250000 and indexation of 2022 would be required so lets assume it to be 305.

So your estimated indexed cost of acquisition would be 6862500.

Capital gain would be 73137500.

You could save same by exemption u/s 54F.

Naman Maloo

CA, Jaipur

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Hello,

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.

For calculation of Cost of Acquisition, you need to get the valuation report from a certified engineer for your share in the property as on 1st April 2001, it would be your Cost of Acquisition. The cost would be indexed using the cost inflation index, making it indexed cost of acquisition.

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

Regards,

CA Hunny Badlani