05 September 2013
RES SIRS, Does capital gains arises to a landowner at the time of execution of Development Agreement with the Builder OR possession/handover of his share of constructed area? If the ans. is Yes then in both the above scenarios ,Can he claim exemption u/s 54f on the entire capital gain? My second Question is when the landowner later sells one of his share of flats HOW IS THE CAPITAL GAINS CACULATED.PLEEESE ANS IN DETAIL AND NOT SUPERFLUOUSLY.EVEN THE CA'S IN MY TOWN ARE ARRIVING AT DIFFERENT FIGURES. THANKS IN ADVANCE
05 September 2013
1.yes capital gains arises at the time of execution of DA. 2.54F can be claimed on entire cg, if other conditions are satisfied 3.if flat is sold, sale value of flat - cost of construction of flat = CG
05 September 2013
Sudarshan Sir, Kindly clarify on following crucial points; 1)In my home state the registration circulars require inclusion of the stamp valuation of a)Constructed area of flat b)proportionate share of land(calculated for each individual flat being registered) c)car parking So how would you calculate now? Would you calculate the LTCGs separately for the land? If no its OK. But if yes what would be the date of acquisition of land-actual date of acquisition or the date of possession of Flat. Also clarify how would one know the cost of construction if the builder hasn't revealed it to the landowner.In such a case can one assume the circle rate as the cost of construction.If yes as on which date -date of dev. agreement or date of possession of flat.
SIR I WILL BE VERY GRATEFUL IF YOU ANSWER MY QUERIES/CONFUSIONS POINT WISE AS ABOVE THANKS IN ADVANCE
1.sale value of land- agreed consideration with deverloper for the land given for development (+) cost of construction of flat (land retained by owner on which flat is constructed) 2.Less: cost of acquisition of land
Cost of construction : letter to be obtained from builder that cost is incurred on the portion of land lord is enough
05 September 2013
Sudarshan Sir, Kindly elaborate terms and phrases used in your last reply reproduced verbatim below
"sale value of land" -Q. Which land? the entire project land or the builders share of land as per agreed conversion?am asking because the landowner retains his title on his share of land even after dev. agreement.
"agreed consideration with developer for the land given for development"- Q. How will the landowner arrive at/calculate the agreed consideration with developer for the land given for dev. ? because the landowner receives the " agreed consideration" (IN KIND IN THIS CASE) which is his share of constructed flats/area + proportionate share/his share of land as per the agreed conversion rate and that too after possession of his share of flats is given by the builder .
"Cost of acquisition of land"- Q. Which land sir? the entire project land or the builders share of land on which the title of landowner extinguishes and the right to sell(along with builder's share of constructed area passes on to the builder? KINDLY REPLY ELABORATELY OTHERWISE I WILL BE MORE CONFUSED THAN BEFORE. THANKS IN ADVANCE
05 September 2013
as per 53A of TP Act, actual transfer(title) need not take place. possession to developer is enough to attract CG. supposing 10000 sq ft of land on which land owner retain 4000 sq ft and 6000 sft given to developer in lieu of the owner gets 4 flats and say rs. 10 lacs cash
here, consideration for giving away 6000 sft is 4 flats + 10 lacs. sale consideration will be 10 lacs + cost of construction of 4 flats is taxable in the year in which possession is given(when POA is given)
cost of acquisition will cost of 6000 sft of land given to developer.THE RETAINED PORTION IS NOT NECESSARY AS IT IS NOT SOLD
05 September 2013
Dear Sudarshan sir, The first stage of capital gains and its calculation in cases of Landowner-Builder Dev. Agreement is quite clear now all thanks to you only. In your first reply to my initial query you said that this capital gains can be exempted u/s 54F in certain conditions. Kindly elaborate sir what are those conditions. NOW SIR KINDLY REVERT TO MY SECOND QUESTION IN MY VERY FIRST QUERY. Say the landlord sells one of his share of flats more than three years after getting possession of his Flats. WILL Long term capital gains arise again? If yes, how it ought to be calculated. I reiterate in my state valuation of sale deed of a flat includes cost of constructed/super built up area+cost of proportionate share of land + cost of parking. If a flat is sold in say Rs 20 lac and the valuation breakup in the registered sale deed is given as follows cost of constructed area-Rs 15 lac cost of proportionate share in 550 sq ft land- Rs 4.5 lac cost of parking-50,000/-
Note-Project land was acquired in the year 1925 by great grandfather of landowner. Circle rate of land is not available till 1996. But old brokers say that the fair market price of land in 1981-82 was around Rs 25 per sq ft for the said locality. PLEEESE DO REPLY SIR. THANKS IN ADVANCE AGAIN
05 September 2013
1.54F condition: the assessee should not own more than 1 house at the time of sale of land
2.on sale of flat, LTCG will arise. sale of land in your case 20L minus cost of construction of that flat as cost of acquisition, cost of land(purchase price)
3.for cost of land 1981 value can be adopted. this can be FMV in the said locality.
05 September 2013
RES. SUDARSHAN SIR, MANY MANY THANKS TO YOU, the second stage of LTCG'S calculation is also quite clear now. If I calculate the LTCG'S by making a guess on land value on the basis of what old timers say about the land price in 1981 in the said locality ,then can the A.O. differ/dispute with me and on what reasonable basis? PLEASE DO REPLY THANKS IN ADVANCE
05 September 2013
you may have to get registered valuers valuation . The AO may counter with guideline value at that time and sale took place at that time
05 September 2013
SUDARSHAN SIR, I Really respect ur patience with me and admire ur knowledge because capital gains issues esp. those arising out of dev. agreements are amongst the most complex/ complicated issues in indian taxation history which has tormented and perplexed the minds of not only income tax officials and tribunals but also the hon'ble high couts and supreme court.What to talk of the helpless and hapless assesses.On a parting note would you be kind enough to ans. a query of mine.
Can an assesse file returns for FY 2009-10 and 2010-11 as of now? Due to prolonged illness of his father and mother,their frequent hospitalisations and their deaths during 2008-12 he could not file returns and pay taxes then.He seriously wants to file now.Please show the way.
05 September 2013
normally returns are to be filed within 1 year(maximum) at the end of AY. for 2009-10 the time allowed is 31.3.2012. You may try filing electronically
05 September 2013
DEAR SUDARSHAN SIR, ON THIS TEACHERS DAY U REALLY HAVE BEEN A GUIDING LIGHT TO ME. If the rules of caclubindia.com permits would u like to share ur email id with me. THANKS A LOT SIR REGARDS
06 September 2013
Yes Sir ,I request you for UR EMAIL ID.
On some afterthought,ONE MORE QUESTION has come to my mind regarding taxation of capital gains Sincerely hope u would ans. it too. Suppose Dev. Agreement was executed in Nov. 1997 and POA in 1998.But grandfather of the assesse due to ignorance of law did not pay the first tranche of capital gains. He passed away in 1999 after that even the assessee's father out of ignorance of law did not pay the LTCG's tax. Now assesse sold a flat in 2011-12 fy which came to his share after family partition in 2003.MY QUESTION IS DOES THE ASSESSEE OBLIGED TO PAY LTCGS tax for both the stages together,one arising at the time of handing over possession of project land to the builder by his grandfather and the second arising at the time of sale of his share of flat in fy 2011-12. PLEESE REPLY SIR THANKS IN ADVANCE
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