I am an Indian national, residing in India at Dombivli, Dist. Thane, State Maharashtra. I am a member of a Co-Operative Housing Society, classified as Tenant Ownership Co-Op.Housing Society and as such holds a Plot of Land in this Society as a member of the Society. Society is the Owner of the entire land and the members have been given Occupation rights.Society is class 2 Occupants. The said plot was originally in the name of my mother. After her death, the plot and the building standing thereon was transferred in my name and I was admitted as a member of the society with the consent of all other legal heirs. When the plot was transferred in my name it had a premise consisting of two rooms standing thereon. Thereafter I have further made an extension of earlier house out of my own resources. The said house is being shown by me in my yearly Tax Returns as self occupied house. Our Society has since passed a bye-law, which allows a member to form a Sub-Society into Society. The present premises have since become 40 years old and I now want to redevelop the house by forming a sub-Society by demolishing the existing house and constructing building thereon. I will be engaging a builder for that purpose and will give Power of Attorney in his favour to redevelop our building and form a Society.I will also execute Development Agreement for the transaction. In return the builder will give me few flats and some Cash. I think I may have to pay Income tax on this transaction. Kindly guide me about taxation in this transaction and the tax planning regarding how I can minimise the Tax.[ ] S.M.DESAI
PLEASE GUIDE ME REGARDING OVERALL TRANSACTION AND HOW I WILL BE TAXED IN THIS TRANSACTION
Dear Sir,
In this case the value of benefit you earned out of this transaction that is jantri rate of the flats transferred to you as well as cash received by you shall be the sales value consideration and accordingly capital gain shall be computed considering index value of property.
If you provide all figures i can provide you exact capital gain working
Sir as per Budget 2017 , in case of development Agreements the Land owner has to pay tax on the flats received by him at the time of receipt of Completion certificate from the Concerned Authority.
So in your case you need to pay Income tax on receiving the completion certificate.
Dear Sir,
As per Budget 2017, in case of redevelopment land owner has to pay tax at the time of receiving the completion certificate. Sale value will be the value of flats received by him plus any cash received by him.
So in your case you need to pay Income tax on receiving the completion certificate.
Please feel free to call/revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
In the Joint Development Agreements(JDAs), the Long Term Capital Gain (LTCG) arises upon handing over the possession of your land for development by signing the irrevocable power of attorney and your share of the developed property is allocated in the JDA itself or an allocation agreement.
Initially you may sign a MoU/preliminary JDA and give power of attorney for the limited purpose of getting approvals from the local authorities for the development and construction and at this stage, the allocation of your share of developed property is not ascertained. At this stage, the possession is not passed on and hence there will not be any LTCG.
You may execute JDA, when the approvals are obtained. At this stage, you may allow possession to the developer to develop and construct by giving irrevocable PoA. Your allocation will also be certain and LTCG arises at this point.
Under the newly amended provisions, if you are waiting till the completion of the construction, your LTCG arises only in the year in which the constructed area is handed over to you.
You need to ensure that the JDAs are drafted suitably to take care of your tax liabilities. Normally, the JDAs with the individuals are one sided in favour of the developers. You may ensure that the draft agreements are duly vetted from tax and legal points of view by a CA as well as a lawyer.
THANKS FOR THE REPLIES.CAN I KNOW HOW I CAN MINIMISE THE TAX .AT PRESENT I AM STAYING IN THE PROPERTY WHICH I PROPOSE TO REDEVELOP.THE DEVELOPER GIVES ME 3 FLATS TOWARDS MY SHARE. CAN IT NOT BE TREATED AS REINVESTMENT AND ACCORDINGLY I CAN CLAIM TAX EXEMPTION.KINDLY GUIDE IF THERE IS ANY OTHER WAY.
Hello Sir,
I presume that the query has been answered by other experts. Please feel free if any part of it is still left unanswered.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP
If you are retaining more than 1 flat, the one you will be residing is self-occupied and the other flats will be let out properties. The cost of one flat can be treated as investment u/s 54, subject to fulfilment of conditions specified therein.
Dear Sir,
Section 54 allow an exemption wherein you have to invest the amount of capital gain in another residential property within 2/3 years to claim the exemption.
In you case, since you are getting the redeveloped house, it will be considered as reinvestment in residential property.
Accordingly, you will get an exemption of the value of redevloped flats. Keep in mind that you can't sale those house within 3 years.
Please feel free to call/revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Hello Sir,
It appears that your query is already resolved by other experts. Please let me know if any of it is left unanswered.
Regards
Keerthiga Padmanabhan
M.Com., CA, LLB
Sir in this case you are not selling and purchasing a new property for claiming exemption. You are only giving the same on development and getting your share where you are not investing anything/money.