We have a land which was bought in 1985 jointly by 10 partners and we are planing to sell it now. To avoid capital gain all the partners have agreed and finalized to buy a land elsewhere wherein we have seen a plot which has an old house. And collectively, every partner wants to build an apartment demolishing the house. If the apartment is built, considering there are 10 partners, each partner would be eligible for 1 flat exemption from Capital Gain (if i am not wrong). Here according to the plan there would be space to accommodate/build 5 more flats. 1. Is the whole scenario the right way to go about. 2.How is the capital gain implied here on the remaining 5 flats. 3. If capital gain tax has to be paid, will it be after the sale of the 5 flats.
If whole of the sales consideration of the old land is reinvested in the new house property, there shall be no capital gain tax liability.
By new house property, I mean the apportioned cost of new land and cost of construction of 1 flat, for each partner.
Capital gains shall come into picture when the remaining 5 flats are sold out.
We are planing to construct the building on our own by means of hiring local construction workers and having the work distributed rather than giving it on a contract to a builder to save extra cost. So would it be a problem withdrawing cash daily for the wages and other payments as the daily wage worker wouldn't be providing bills of such for their service. How do we account this in our construction cost?
You can maintain wages register which shall contain signatures of the workers when payments are made.
Also, you should get a valuation report by a registered valuer in regards to the total cost of construction.
Hi,
If you invest the full capital gain amount in the property of each partner then capital gain will become exempt.
Yes, you have to pay capital gain taxes on sale of those 5 flats.
Further, with respect to cost of contruction ,you have to maintain wage sheet, you can make payment via cheque(if possible). To be on safer side, you can also get the valuation of Construction cost.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Hello,
You will have to get vouchers prepared by them and as a safety mechanism ask them to submit their PAN/ Aadhaar Card. You may also ask them to take the payment via bank transfers. As because of Jan Dhan Yojana and Demonetization everyone should have a bank account for at least one person in their family.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
