Good Will received in money through Bank

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This discussion clarifies the tax implications of goodwill received by a client from a joint development agreement for agricultural land. The goodwill payment, received in instalments over different financial years, is considered taxable income. It should be added to capital gains arising from the transfer of land, with the classification as short-term or long-term capital gain depending on the land's holding period. If the goodwill income was omitted from previous tax returns, it should be declared in the current financial year, ideally upon receipt of possession of the developed property.

raghavendra b

raghavendra b (Querist)
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08 July 2022 Dear sir,
One of my client entered joint development
Agreement. My client made GPA of his agriculture land to one of the developer. The developer paid Rs . 825000/-, as a good will to my client. Now the good will taxable income or not

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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08 July 2022 Yes, taxable, but in the year when the developed property is received back.

raghavendra b

raghavendra b (Querist)
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08 July 2022 thank you sir,
When development process completed both of them share the 50-50 of developed sites. Then good will taxable under CAPITAL Gain.

Regards

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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08 July 2022 Yes, it will be added to other CG arrived over the property.

raghavendra b

raghavendra b (Querist)
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08 July 2022 THANK YOU FOR YOUR REPLIES SIR,

BUT ACTUALLY WHAT HAPPENED MY CLIENT RECEIVED GOOD WILL AMOUNT IN DIFFERENT FINANCIAL YEARS MEANS 2018 RS. 2.50LAKHS 2019-20 RECEIVED RS.3LAKHS IN THIS YEAR MEANS 2021 RECEIVED RS.70000/-. AND THIS FINANCIAL YEAR MEANS 2021-22, THE DEVELOPMENT PROCESS COMPLETED THEY SHARE THEIR SITES IN 50-50 RATIO.

MY PROBLEM IS FOR LAST FINANCIAL YEAR WHEN HE RECEIVED THE GOOD WILL AMOUNT NOT DECLARED IN HIS INCOME TAX RETURNS. NOW WHAT TO DO

PLEASE SUGGEST ME

REGARDS

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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08 July 2022 Declare it in current FY (2021-22) & file return.

raghavendra b

raghavendra b (Querist)
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08 July 2022 THANK YOU SIR,

BUT HE RECEIVED ENTIRE GOODWILL AMOUNT MEANS 8LAKSHS RUPEES TAXABLE INCOME SHOWING UNDER SHORT TERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN HOW TO CALCULATE THE INCOME TAX.

REGARDS SIR

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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08 July 2022 It will be added to gains arrived from the transfer of land. If holding of land is 2 years or more then the total gains will be long term.

raghavendra b

raghavendra b (Querist)
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08 July 2022 THANK YOU SIR,

MY CLIENT WAS HAVING AGRICULTURAL LAND IT WAS CAME FROM HIS INHERITANCE PROPERTY HE DECIDED TO DEVELOP THE LAND AFTER THE PROCESS OF ALLEGATION INCLUDING DEVELOPMENT OF LAND UNTILL FOR THE USE OF HOUSE CONSTRUCTION. THEN HE CONTACTED THE DEVELOPER BUT WHEN HE WAS RECEIVED THE AMOUNT BOTH OF THEM DID COME TO THE JOINT DEVELOPMENT AGREEMENT. AFTER THEIR CONDTIONS WERE SATIFIED MY CLIENT RECEIVED GOOD WILL AMOUNT THROUGH THE BANK IN DIFFERENT DATES. NOW THIS FINANCIAL YEAR 2022 THEY BOTH HAVE ENTERED THE JOINT DEVELOPMENT AGREEMENT. SO THIS THE PROBLEM SIR, PLEASE DONT MISTAKEN ME DEAR SIR, I NEED KNOWLEDGE OF THIS SITUATION CREATED BY THE CLIENTS BEYOND THEIR GOING TO TAKE A PROPER SUGGESTIONS.

THANK YOU SIR, REGARDS

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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08 July 2022 IT department checks the total tax liability, to be collected at earliest. If you have paid it, no need to worry for delay in other formalities.

raghavendra b

raghavendra b (Querist)
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08 July 2022 THANK YOU FOR YOUR REPLIES SIR,

I HAVE FORGOTTEN ONE THING THAT I HAVE TO INFORM TO YOUR KIND ATTETION, NOW MY CLIENT DECIDED TO SELL HIS TWO SITES OUT OF HIS SHARE IN THIS CURRENT FINANCIAL YEAR COULD WE DECLARE THE OMMITTED GOOD WILL INCOME TO THIS YEAR. IS THERE ANY POSSIBLE YOUR GUIDENCE NEEDED.

REGARDS

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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09 July 2022 Yes, omitted goodwill amount is to be declared in the year of receipt of possession of the developed property..

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