Dear sir
pls clarify the issue
how to calculate the incometax for a builder.I mean a builder who constuct some building by using his own plot & in between construction he enters into an agreement for some of flats & get some advances from customer,my question is whether the advances is an income for which he has been liable to incometax in the year of receipt,or treat is as an advance & finally when the building is complete & posssession is transfered he has to pay income tax
Advance received from the flat holders is not treated as an income of the builder. It is shown as liability to the account of the flat holder in the B/S. When the builder has received all teh installments from the flat holders & he has issued the allotment letter to the flat holder, then the sale is considered to be complete.In usch case the builder would book the sale & it will be considered as the income of the builder at that time.
Sir
i got it as u said that as 9 will be applicable in that case,but i recently refered to the guidance note for real esaste developer by icai where their is another clause that if the agreement to sell has been entered into for transfering all risk & reward to customer then as -7 is applicable in that case
can u pls enlight the provision with that respect
CAclubindia
