Capital Gains on Joint Developement

Dear Sir,

Your capital gain would be aggregate of monetary consideration plus market value of the flat which you are getting. However, you will get the proportionate exemption for the amount of flat under section 54F. This is subject to the fact that you satisfy all the following conditions:

The exemption is allowed only if the new property is a residential house.

The exemption is allowed, If you did not have any more than one residential property before the new house.

The purchase of new residential house should be within one year before or 2 years after.

The construction of residential house should be completed within 3 years.

The residential house should be in India.

The assessee should sell or transfer the new house within three years of its purchase or construction. If it happens, the capital gains exemption would be withdrawn similar to the section 54.

Calculation of Exemption Under Section 54F :

The total capital gain would be exempted if 100% sale proceeds is invested in the residential property.

If full capital gains is not invested (i.e. your case), exemption shall be allowed proportionately. The exempted amount would be calculated according to the following formula.

Capital Gain X Amount Invested/Net Sale Consideration

Please feel free to call/revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com

In consideration of your parting away with a site of 2,400 Sft., you will get 1 flat along with undivided share of land. Hence, there will be capital gains on the land you are parting away with.

As you are getting only one flat, you may get exemption u/s 54F, if the new flat is a residential house and you do not have any other residence and further subject to fulfilment of other conditions therein.

Hi,

In case of Joint Development Agreement, there is tax liability in 2 stages.

First, Capital Gains on transfer of rights in the Land. The Capital Gain will be calculated by taking the Monetary Consideration received or Stamp Duty Value of the Land rights transferred to Builder, whichever is higher as the Sales proceeds. This will be taxable in the Year in which the Construction of the Flats is completed.

Second, there will be Capital Gains on sale of the Flat received by you from the Seller. The period of holding will be taken from the year in which you get Possession of the Flat.

As per Income tax Act if you receive any consideration for transfer or parting with possession of the property then Capital Gains is attracted. It can be in monetary terms or in any other form. Receiving a flat in exchange of the parting with possession of the Land also attracts capital gains.