Capital gain

Tax planning 377 views 2 replies

Taruna Agarwal

CA Practice

38 Points Joined July 2013

Dear Sir,

my query is that there is a four persons who hold a land of 10000 sq. ft land jointly received from father as inherited land, now they have done the agreement with developer. The developer will construct the flats on the land and 60 % value of sale of flats will give to land owner and 40 % value of sale of flats will be of developer.

now in above case"-

1. what is the capital gain tax Liability in the hand of land owner and developer.

2.when the capital gain tax liability will arise (at the time of agreement or at the time of receipt of sale alue of

flats.

3. what is the cost of acquisition in hands of land owner and developer.

Kindly solve my problem plzz...

Replies (2)

Swami Ayyappa Nuli

TAX ADVISOR & CONSULTANT AT G.S.T SUVIDH

1372 Points Joined June 2012

In your case, it is just a matter of transfer of Income out of sale proceeds of flats to the developer and I can conclude that there is no registration process carried out to register constructed flats in the name of developer. So Income arises from this activity is taxable as Income from Capital gain in the hands of Land owner and as Business Income in the hands of developer. In your case as Developer accepts 40% of sale proceeds of flats as Construction fee, it is cost of acquisition to Land owner for 100%Flats and deduct above cost along with Land cost from Sale proceeds of 100% Flats and capital gain arise there on to be apportioned among four Co-owners. As developer keep track of his construction cost, Such cost need to be deducted from 40% Flat sale proceeds to compute Business Income, Thank you.

Mihir

Wealth Manager

5293 Points Joined December 2008

Since the land was inherited, the cost of acquisition for the four heirs shall be the cost of acquisition for the previous owner of their father. The capital gain arises at the time of sale and not at the time of signing the development agreement with the developer.