Real estate

This query is : Resolved

CA.Ritu Agarwal (Querist)
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30 November 2013 Directors of Company are having Land in their name.

The company is in the process of developing that land and make flats.

Now what is the best option.
1. the directors can sale land to company and then the company can develop land. in that case they have to pay 20% tax on capital gain and company will pay tax on sale of flats.

2. both the company and land owner can enter into joint venture to develop the land. and share profit accordingly and pay tax.

what will be the best options in terms of tax planning.

moreover if they enter into Joint venture do they need to register that.

Kindly reply.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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01 December 2013 doing a joint development agreement is a better option.

One way or the other (outright sale or joint venture) the directors will end up paying tax on the capital gains.

So why bother getting into a joint venture and do several additional compliance as joint venture would be a separate legal entity.

do a JDA, ensure that the agreement should not be too much in favor of the directors. Keep a cash portion in the consideration to be paid to the land owner (more or less equivalent to the capital gain tax liability). Rest of the consideration be in form of flats.

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