Capital gains in pagdi house

Hello to all,

Following are my queries in relation to sale of pagdi rights

a. Is capital gain tax charged on sale of pagdi rights of a house property?

b. Is GST applicable in sale of padgi transaction ?

c. Is TDS to be deducted by the buyer if the transaction amount is above ₹50 lakhs.

 Looking forward for getting some insight on this. 

 

Thanks.

Replies (7)

a.. Yes

b. No for structure transfer, but yes for goodwill transfer.

c.  Yes

I would like to throw some light on the Pagdi aspect so that everyone (who might not aware of this term) could have an idea about it;

As Far As I know about it, The Pagdi system is as it's name suggest transferring the right (part-right) called PAGDI in traditional term. Under this system, the tenant is a part-owner of the house but not the land. The tenant also keeps paying the rent till he has not sub-let the premise. This tenant or part-owner could also sell the property but a portion, about 30-50 per cent of the gross amount had to be paid to the real owner. If the part-owner puts this house on rent, even this rental income is divided among the real and part-owner. 
To understand the system better, I gove you an example: In Pagdi system, if an existing tenant wants to sell his home for Rs 10 lakh, he is compelled to pay anywhere between 3 to 5 lakh to the owner.


Example- You could find in Old Delhi Chandni Chowk thousand of Properties which are still under this system.

Now coming to your query (in sequence);

1. The Pagdi Holder (tenant) would be liable to pay capital gains arising on sale of Pagdi rights but only to the extent of his part (i.e. excluding the part which he has to pay to the tenant)

2. Usually It cannot be in form of Business and therefore GST cannot be charged for this.

3. Pagdi Holder is deemed as part owner of building but not the land which means It is essentially a SALE OF RIGHT AND NOT THE SALE OF PROPERTY, therefore in my opinion TDS u/s 194-IA cannot be there.

Other suggestions are highly appreciated.

Thanks.
I concur with nitish...
Thank you brother @ rama krishnan.. 😊😊
Hello
GST also leavy on Transfer of Tenany right because it is a supply u/s 7. In pagdi land owner is remain same only the tenant are changed due to transfer of tenancy right to other.so schedule 2 of section 7 classify it as service and rate of GST is 18% on such transaction.also refer CBIC clarification on this 44/18/2018--CGST

Whether indexation is allowed on tenant's purchase cost?

It is sad to note that people who do not know on the subect are commenting here. Tenanted premises can not be a owner of the preimises be it land or otherwise.  He is allowed to stay on rent so long as he follows the rules and regulations of the landlord.

There is not such written rule that tenanted premises can sell his rights to the third party, it is not allowed. If tenant has to go away he simply has to handover the premises to the landlord. And landlord then does with his property the way he likes.

It is possibel to sometimes 30/40% of the value of the tenanted premises it taken as pagdi by the landlord, but there is not such a hard and fast rule or written rule. 

 

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