Collaboration with builder for reconstruction of property

Hello,

If I have understood your query correct. Instead of paying money to your builder you will give him one floor of your property in lieu of money and one floor will be sold by you to some other party in exchange for money.

You can divide your indexed cost of acquisition of the property into 4 parts and adjust a part of it against the sale proceeds of the Second Floor flat. The only risk here is depending on the wordings of your contract, the assessing officer should not consider your case to be of Business in nature rather than Capital Gain.

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

Such arrangement mentioned by you are covered under Joint Development Agreements (JDA).

As per the new ammendment in law, capital gain arising on transfer of land or building or both, by an individual or HUF entering into a JDA, shall be chargeable to tax in the previous year in which certificate of completion is issued for the whole or part of the project by the competent authority.

Stamp duty value of the land owner's share, on the date of issue of completion certificate as increased by money consideration, if any, is proposed to be the full value of consideration;

Further, the pre-sale, on or before the date of issue of completion certificate, shall lead to taxation of capital gains in the previous year of transfer.