Capital Gains Taxability in the hands of land owner in case of a joint agreement

Tax queries 1035 views 2 replies

srinivasa rao

21 Points Joined June 2009

Case:

An Assessee buys land in the year Oct-2011 for 800,000.

He enters into a Joint development agreement in Sep'2021 with Real Estate developer and transfers his land to the developer and in return gets 1 Flat as part of the agreement.

The Flats are completed in Jan’2023 and occupancy certificate is received in Feb’2023. The stamp duty value of the flat is 40,00,000.

What is the Capital Gain the below scenarios?

If the landowner occupies the flat for his own residential purposes?
If the landowner sells the flat in Jan-2023 to a buyer for 42,00,000 i.e. before the occupancy certificate is received?
If the landowner sells the flat in Mar-2023 to a buyer for 42,00,000 i.e. after the occupancy certificate is received?

What are the options available to the assess to avoid Capital Gains Tax under each of the above scenarios?

Investing in 54EC bonds, buying another residential property within one year etc.

Replies (2)

sabyasachi mukherjee

27934 Points Joined May 2017

1.LANDOWNER OCCUPIES THE FLAT - NO CAPITAL GAIN. NO CAPITAL ASSET TRANSFER.
2. BEFORE THE COMPLETION Certificate the buyer cannot sell the flat.
3. capital gains but no gst.

Manoj BG

Tax Professional and in Service

1795 Points Joined June 2009

1. That would be deemed to be taxable as capital gain on the date of issue of completion certificate in terms of section 45(5A) of the income tax act. I assume you have got CC in Feb 2023 and accordingly, your capital gain would be INR 2,560,870 as LTCG.

2. Assuming CC and OC dates are in same FY, capital gain would be INR 2,760,870 as LTCG.

3. Assuming CC and OC dates are in same FY, capital gain would arise at two level as below :

a) One which is based on the receipt of property in exchange of land which we have already calculated at point no. 1 i.e. INR 2,560,870 being long term capital gain.

b) Other is sale within 1 month of possession that would trigger SHORT TERM capital gain of NR 2,00,000 and accordingly, tax shall be payable thereon at prescribed rates.

Long term capital gain mentioned under 1, 2 and 3(a) shall be saved by investing in 54EC notified bonds within 6 month from the date of Completion certificate or investing in another residential property u/s 54, failing which you need to pay tax on the entire LTCG amount.

Regards,

Manoj B. Gavali