Taxability of JDA - Sec 45(5A)
This query is : Resolved
17 September 2025
Dear Experts,
One of our clients entered into a Joint Development Agreement (JDA) with a builder during FY 2022-23. As per Section 45(5A) of the Income-tax Act, the capital gains arising under a registered JDA are taxable in the year in which the completion certificate is issued. In this case, the completion certificate was issued in FY 2024-25. However, since the JDA was not registered, the benefit of Section 45(5A) may not be available. The capital gains were also not offered to tax in FY 2022-23, the year in which the agreement was executed.
We would like to seek your guidance on the appropriate course of action in such a situation. Should the capital gains be offered to tax in FY 2024-25, or would it be necessary to file an updated return for FY 2022-23. We look forward to your valuable inputs on this matter..
One of our clients entered into a Joint Development Agreement (JDA) with a builder during FY 2022-23. As per Section 45(5A) of the Income-tax Act, the capital gains arising under a registered JDA are taxable in the year in which the completion certificate is issued. In this case, the completion certificate was issued in FY 2024-25. However, since the JDA was not registered, the benefit of Section 45(5A) may not be available. The capital gains were also not offered to tax in FY 2022-23, the year in which the agreement was executed.
We would like to seek your guidance on the appropriate course of action in such a situation. Should the capital gains be offered to tax in FY 2024-25, or would it be necessary to file an updated return for FY 2022-23. We look forward to your valuable inputs on this matter..
18 September 2025
Whether any compensation was offered in cash in FY 2022-23?
Or Any TDS deducted by developer in 2022-23?
Or Any TDS deducted by developer in 2022-23?
18 September 2025
Thank you for getting back to me so quickly and for your feedback sir. No cash compensation was provided for the financial year 2022-23. Additionally, TDS was deducted by the developer in FY 2022-23; however, the TDS amount has not been claimed in either FY 2022-23 or FY 2023-24 sir.
18 September 2025
Non-Registration of the JDA:
Since the JDA was not registered, the benefit of Section 45(5A) may not apply directly. The taxability of capital gains under an unregistered JDA will depend on whether the JDA itself constitutes a legally binding transfer of rights in the property (even though it’s not registered).
In the case of an unregistered JDA, the transfer of rights under the agreement is may still considered as a "transfer" for tax purposes, and the capital gains may become taxable based on THE TERM & CONDITIONS of the agreement and the transfer of possession of the land or property.
Since the JDA was not registered, the benefit of Section 45(5A) may not apply directly. The taxability of capital gains under an unregistered JDA will depend on whether the JDA itself constitutes a legally binding transfer of rights in the property (even though it’s not registered).
In the case of an unregistered JDA, the transfer of rights under the agreement is may still considered as a "transfer" for tax purposes, and the capital gains may become taxable based on THE TERM & CONDITIONS of the agreement and the transfer of possession of the land or property.
18 September 2025
Timing of Capital Gains Taxation:
Since the capital gains were not offered to tax in FY 2022-23 (the year in which the agreement was executed), there could be two options available:
Offer Capital Gains in FY 2024-25: If the JDA has been executed and completed in all other respects (e.g., possession of the property has been given, or other conditions of transfer are met), and the CC is issued in FY 2024-25, you can offer the capital gains for taxation in FY 2024-25.
Return for FY 2022-23: Since the capital gains were not offered to tax in FY 2022-23, one option is to file a updated return for FY 2022-23 and offer the capital gains in that year. This would be applicable if the transfer was deemed effective in FY 2022-23 (i.e., possession or other rights were transferred in that year).
Since the capital gains were not offered to tax in FY 2022-23 (the year in which the agreement was executed), there could be two options available:
Offer Capital Gains in FY 2024-25: If the JDA has been executed and completed in all other respects (e.g., possession of the property has been given, or other conditions of transfer are met), and the CC is issued in FY 2024-25, you can offer the capital gains for taxation in FY 2024-25.
Return for FY 2022-23: Since the capital gains were not offered to tax in FY 2022-23, one option is to file a updated return for FY 2022-23 and offer the capital gains in that year. This would be applicable if the transfer was deemed effective in FY 2022-23 (i.e., possession or other rights were transferred in that year).
18 September 2025
Recent Supreme Court rulings such as Balbir Singh Maini clarify that, without registration, a JDA is not recognized in law and transfer provisions do not apply, so capital gains do not arise until there is a formal transfer—usually at registration of the final conveyance.
Practical Implications
Capital gains tax is NOT triggered merely by signing an unregistered JDA or handing over possession for development purposes.
Taxability arises at a later stage—mainly when the final registered document (such as a sale deed) is executed, effecting transfer of title.
No obligation exists for the landowner to pay capital gains tax at the time of entering into or acting upon an unregistered JDA.
Practical Implications
Capital gains tax is NOT triggered merely by signing an unregistered JDA or handing over possession for development purposes.
Taxability arises at a later stage—mainly when the final registered document (such as a sale deed) is executed, effecting transfer of title.
No obligation exists for the landowner to pay capital gains tax at the time of entering into or acting upon an unregistered JDA.
19 September 2025
Good Luck...
19 September 2025
Thank you very much sir for your valuable suggestions.
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