I have 100000 sq ft area which i converted into small plots.
due to government rules I have transferred 40000 sq ft to government for open space and for roads.
i have remaining only 60000 sq ft .
now i sell 10 plots from this area.
for purpose calculation open space and road cost are considered as expenses for land.
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Capital gain (open space and road )
Replies (2)
Open space you will receive some amount as compensation.
Plotting land and surrendering roads or open spaces:
• Converting land into plots and selling them: if done as business (developing and selling plots), it's business income. Converting a capital asset (land) into stock-in-trade attracts Sec 45(2) (capital gain on conversion, taxable when plots are sold).
• Land surrendered to the government or local authority for roads and open spaces (as required by layout approval rules, without compensation): it's part of the cost of developing the saleable plots. Its cost is absorbed into the cost of the saleable plots (allocate the total land cost over the saleable area).
• Development expenses (roads, drainage) are added to cost.
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