Hello Sir/Madam, I am planning to enter into a development agreement with a builder from Hyderabad. 400 sq.yids of land is being given to the developer. the land in question was purchased in the year 1955 by my grandfather. In 2005, he transferred the ownership to my dad on the basis of a will deed. My dad in turn has executed a gift deed this year(2020) transferring the ownership of the land onto my name. The builder has given me a layout of the building that he will be constructing over the next 1-2 years. The project will have 10 flats, out of which 5 flats fall under my share. Suppose, if i sell my share of flats @60,00,000INR per flat in FY 2021-22, the total income i would get from sales of 5 flats is 3crores. development agreement is happening in FY 2020-21, sale transactions will be carried out in 2021--22 In the above example, what will be the AY year of taxation and what is the approximate capital gains tax i need to pay if i sell all my flats in 1 financial year? Awaiting your response Thanks & Regards
There will be 2 type of capital gain.
1. When the building gets complete on transfer of share to developers and
2. When you sale the completed flat.
Capital gain calculation would require many other information.
It would be great if you book a phone consultation and provide other details individually.
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Thank you
Dear Sir,
Hope you are doing well !!
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 floors 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.
We have handled such cases before.
We may assist you in entire procedure.
It is advisable to take a phone consultation for detailed discussion.
Hi
In case of JDA taxability in hands of landowners arise on receipt of the certificate of completion for the whole or part of the project, issued by the competent authority,
In case of sale of flats taxability arise when actual sell transactions is took place.
For calculation of capital gain we need more data .
Hello Everyone. Thanks all for your answers. I have watched videos on you tube, on how to compute capital gains. from what i understand, capital gains= total sale consideration - cost of acquisition. Since this land was inherited by me from my father and this land was bought way back in the year 1955, I guess Fair market value as on 01.04.2001 will be taken into consideration for calculating cost of acquisition. Now let us consider fair market value of 400 sq.yds bit to be 4,00,000INR(@1000 INR per sq yd) in the year 2001 . Since my case falls under long term capital gain, I need to come up with Indexed cost, which would be (4,00,000/100)*301= 12,00,000 INR (approx) For calculating sale consideration, The word stamp duty value is creating confusion in my mind. The developer has promised to handover 5 flats as part of my share. The built up area of each flat would be somewhere around 1100sqft. I am planning to sell each flat @57,20,000INR (@5,200 INR per sq ft). lets consider 60Lakhs for the sake of easier calculations Now what would be the total sale consideration Is it 60,00,000 * 5 =3 crores or is stamp value different from the actual sale price? if stamp value is different from the actual sale price, For the same flat if we assume stamp value to be 20,00,000 per flat, the total sale consideration would be 1 crore. Scenario 1: total capital gain = 3crore- 12,00,000= 2.88 crores(stamp value=sale value of the flat) Scenario 2 :total capital gain = 1 crore- 12,00,000=88,00,000(stamp value and actual sale value are different) which scenario will be considered to calculate long term capital gain. please clear my doubt regarding the difference between stamp value and actual sale price of the flat. depending on your answer,I'll decide whether to go ahead with development agreement or outright sale of land. which scheme is more beneficial in order to save tax on capital gains?
Hello,
In case of JDA, Capital Gain is applicable as per Sec. 45(5A)
As per Sec. 45(5A), in case of the joint development agreement, the capital gains are chargeable in the 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, capital gain would be applicable to the sale of flats received from the JDA, the sale consideration would be the actual consideration received for the flat and the cost would be the stamp duty value as considered above.
I hope this answer satisfies your requirements.
Regards,
CA Hunny Badlani
For the Capital gain in the first instance, the sale consideration would be the stamp duty value on the date of completion certificate and the cost of acquisition would be the Fair market value as on 01.04.2001.
Further, on sale of flats, the sale consideration would be the actual consideration received for the flats and the cost would be the stamp duty value as considered above.
Provided, the above-mentioned provisions of Sec. 45(5A), would not apply if the flats of your share are transferred before the date of the issue of the completion certificate.
he procedure to calculate the capital gains of inherited property is given below:
Step 1: You must know the cost of acquisition and indexation in order to calculate the capital gains.
Step 2: Cost of the property – The property did not cost anything to the inheritor, but for calculation of capital gain the cost to the previous owner is considered as the cost of acquisition of the property.
Step 3: Indexation of cost – The year of acquisition of the previous owner is considered for the purpose of indexation of the cost of acquisition along with the year of sale of the property.
Step 4: The base year for such calculations has been updated from 1981 to 2001.
Step 5: Calculate the cost of capital gains using the formula,
Cost of acquisition x Cost Inflation Index of the year of acquisition / Cost Inflation Index of the year of sale
Thanks and regards
Shiv Kumar Agarwal
Dear Sir,
Hope you are doing well !!
You need to pay the capital gain taxes as per scenario 1.
Hi
In calculation of capital gain actual sale consideration is to taken. In your case it would be 3 cr. So amount of capital gain would be 2.88 cr.