IF THE LANDOWNER DOES NOT FALL UNDER 45(5A) OF INCOME TAX ACT, DOES HE ANY OTHER WAY TO STRUCTURE HIS JDA SO THAT CAPITAL GAIN DOES NOT ARISE ON THE DATE OF JDA?
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INCOME TAX PROVISIONS ON JOINT DEVELOPMENT AGREEMENT
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Quick Summary
In all the recent JDA by individual or HUF assesses, the tax liability arises only on receipt of the possession of the developed property.
I appreciate your answer, but could please share the basis of your conclusion, so that it could be defended if required in future or
the structure of the JDA by which capital gain is deferred by the landowners nowadays.
Applicable from A.Y. 2018-19 – whether to JDA entered on or after 01.04.2017.
Summary of Section 45(5A) •
Year in which the completion certificate is issued by the competent authority for whole or the part of project is the year of taxability. – ‘Year of taxability’
Year in which any of the clauses of Section 2(47) gets triggered – ‘Year of transfer’.
Thus, the ‘year of transfer’ might not be same as ‘year of taxability’.
For other assesses the conditions can be structured in the contract to that effect.
IF THE LAND IS SHOWN AS WIP I.E. STOCK, THEN CAN CAPITAL GAIN BE CHARGED, BECASUE IT IS NO MORE A CAPITAL ASSET.
When the land is WIP under business inventory, profits from it is assessed under PGBP head.
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